The global economy is likely to face more frequent and disruptive shocks, with financial crises presenting the greatest danger, the Organisation for Economic Co-operation and Development (OECD) predicts.
The OECD’s Future Global Shocks report claims that the international economy faces its greatest danger from five events – a financial crisis, a pandemic, a cyber-attack on critical infrastructure, socioeconomic unrest and a geomagnetic storm – and recommends the international community improves co-operation to tackle them.
“Arguably, financial crises both occur more frequently and produce more severe monetary damage than the other types of risks described,” the study adds.
Noting that such events can take many forms, including bank runs, asset bubbles, currency crises and sovereign default, the organisation says financial shocks have steadily increased in frequency without any consensus being reached on why.
The report continues: “It appears likely that they will continue to occur, which is precisely why tools are needed to anticipate them and reduce the severity of their impacts.”
It also draws attention to the contagion effect when a sovereign nation or major financial institution is forced to default on its debt. The report highlights the danger this creates in a globally interconnected economy.