A bolt from the blue? Amplified social risk ahead

  • The ongoing cost-of-living crisis has exacerbated social risk globally, and further widened the gap between advanced economies and emerging markets. This year, our proprietary Social Resilience Index (SRI), which combines 12 indicators measuring economic and social vulnerabilities for 185 countries, fell by 2.1 points from 45.7 in December 2021. This outcome is largely driven by currency depreciations, higher import bills for food and fuel as a percentage of GDP and declining labor force participation. The gap in social resilience between advanced and emerging economies has widened further, mostly because of differentiated (fiscal) responses to the cost of living and energy crises. Denmark topped our social resilience ranking again, followed by Finland (+3, compared to 2021) and Switzerland (+1). Latin America, the only region with a decline in social risk over the past couple of years, now ranks better overall than Emerging Asia. Net food- and fuel-importing countries experienced the largest increases in social risk. while commodity exporters jumped ranks such as the UAE (rank 11, +31), or Qatar (17, +7). Full scores, rankings and changes are available in Appendix 1.
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  • Conflictuality is on the rise. A packed election calendar in 2024 could set the stage for increased social risk in 2024. Increasing social unrest has economic repercussions, stalling much-needed private investments in infrastructure. 75% of global GDP is going to the polls next year, including the US, the EU and India. Our analysis matching underlying social risk with social unrest and political risk events shows that countries to watch include hot spots such as Senegal and Ghana, with already high social risk and a recent increase in social unrest. However, countries with high social risk and decreasing unrests may exhibit hidden vulnerabilities in the run-up to often disputed elections.
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  • Looking forward, beyond sound economic and redistribution policies, increasing social resilience means higher civic participation, and strong AI policy capabilities – to manage risks related to job losses and misinformation. In our December 2021 update, we mentioned strong fiscal response and employment policies as major shields against higher social risk. We also called for prioritizing the fights for food security, and gender and income equality. This year, the ultra-long electoral year ahead pushed us to investigate the relationship between societies, citizens and the public sector, and government effectiveness and crisis response. Countries that score high on our Social Resilience Index tend to have the highest levels of civic participation (e.g. Denmark, Finland, Switzerland and Iceland). Similarly, the rise of generative artificial intelligence could further reduce social resilience by increasing job losses and the spread of misinformation. Governments have begun to introduce responsive regulatory regimes to avoid labor displacement and hedge against other risks that might affect social stability. But the service-heavy advanced economies will have to adapt to keep up with the pace of technological development.
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Manfred Stamer
Allianz Trade
Luca Moneta
Allianz Trade