DEPRESSION, HYPER-INFLATION MAY IMPACT GLOBAL GROWTH: SURVEY

At a time when world economies are struggling with the economic slump, risks such as falling growth and income levels as well as extremely high inflation can impact the global economic growth, says a survey.

Global consultancy firm Watson Wyatt has ranked 15 extreme risks that would have a high impact on global economic growth and asset returns. The top three are - depression (falling growth and income level), hyperinflation (extremely high inflation) and excessive leverage (debt burden cannot be serviced from income).

Besides these three, others in the top 10 risks are extreme movement between floating currency rates, banking crisis (balance sheets cannot absorb another shock), sovereign default (default by a developed country on its debt), climate change, political crisis, insurance crisis and protectionism.

Other major risks outlined by the survey are end of capitalism, war and killer pandemic.

Watson Wyatt senior investment consultant Tim Hodgson said, "By accounting for these risks in advance, rescue plans can be formulated so that they are ready to implement as soon as necessary to prevent value destruction."

The 15 extreme risks were classified as financial, economic, political and others.

Financial extreme risks revolve around solvency and whether a financial institution is able to pay its debts with available cash.