Cost-of-living crisis fuels political turmoil

Protest intensity in 2022 and the first quarter of 2023 correlate most strongly with rising energy prices, slower real wage growth, and the proportion of wages set by collective bargaining...

This is according to the latest Political Risk Index report released by WTW.

The report details that in 2023 intense cost-of-living protests struck hardest in developed and wealthier emerging markets. Other findings include:

• Up to three million person-days were devoted to cost-of-living protests in 122 countries and territories in 2022
• Protests regarding government policies on energy are among the most important drivers of cost-of-living unrest globally
• Protests in richer nations suggest that the trend toward escalating property damage and business interruption from social unrest is likely to continue
• Countries where collective bargaining is common, including many countries in Western Europe, are likely to be continually impacted by intense and economically costly protests if inflation remains high

Looking to the year ahead, the report concludes with a set of risk indices finding Argentina, France, Spain and Italy most vulnerable to wage protests with analysis suggesting that in 2023 wage protests may become increasingly intense in the emerging world.

Evan Freely, Global Head of Financial Solutions, WTW, said: “The international community continues to grapple with the cost-of-living crises and its wide consequences. This report indicates that rising prices, particularly in food and energy, often results in a political cost including more frequent examples of disruptive civil unrest.  The economic climate, particularly inflation, is also increasing credit exposure for organizations across the globe.”

Sam Wilkin, Director of Political Risk Analytics, WTW adds, “The ramifications are associated with turmoil in rich, poor, and developing countries alike. Globalization has seen businesses grow their interests and assets further from home and this report will help Boards identify and manage emerging risk areas.”

The analysis conducted has been drawn from the Armed Conflict Location & Event Data Project (ACLED) and the Global Protest Tracker from the Carnegie Endowment for International Peace (CEIP).

The complete report can be downloaded here.