Imminent economic storm, business and government leaders warn in Davos


General view of people walking in front of the World Economic Forum (WEF) logo during the forum in Davos, Switzerland, May 23, 2022. REUTERS/Arnd Wiegmann

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DAVOS, Switzerland, May 23 (Reuters) – Multiple threats to the global economy dominated concerns of the world’s wealthy at the annual Davos festival of reflection on Monday, with some signaling the risk of a global recession.

Political and business leaders gathered for the World Economic Forum (WEF) meet amid inflation at its highest level in a generation in major economies including the United States, Britain and Europe.

These price increases have shaken consumer confidence and rattled global financial markets, prompting central banks, including the US Federal Reserve, to raise interest rates.

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Meanwhile, the repercussions on oil and food markets from Russia’s invasion of Ukraine in February – which Moscow describes as a “special military operation” – and China’s COVID-19 shutdowns with no clear end have worsened the gloom.

“We have at least four crises, which are intertwined. We have high inflation…we have an energy crisis…we have food poverty and we have a climate crisis. And we cannot solve the problems if we we are focusing on just one of the crises,” said German Vice-Chancellor Robert Habeck.

“But if none of the issues are resolved, I’m really afraid that we will hit a global recession with a huge effect…on global stability,” Habeck told a WEF roundtable.

Last month, the International Monetary Fund (IMF) cut its outlook for global growth for the second time this year, citing war in Ukraine and calling inflation a “clear and present danger” for many countries. Read more


European Central Bank (ECB) President Christine Lagarde, who is due to speak in Davos on Tuesday, has warned that growth and inflation are on opposite paths as mounting price pressure dampens activity economy and devastates the purchasing power of households.

“The Russian-Ukrainian war may well prove to be a tipping point towards hyper-globalization,” she said in a blog post on Monday.

“This could lead to supply chains becoming less efficient for a period of time and, during the transition, create more persistent cost pressures for the economy,” Lagarde added.

Still, she essentially promised rate hikes in July and September to curb inflation, though rising borrowing costs are expected to weigh on growth. Read more

While the economic drag from the Ukraine crisis is felt the most in Europe, it is the US economy that is feeling the greatest pressure on prices.

The consumer price index rose from near zero two years ago to a 40-year high of 8.5% in March. The Fed responded earlier this month with its biggest rate hike in 22 years, and Chairman Jerome Powell signaled increases of a similar magnitude – half a percentage point – at his next two meetings in less.

Higher rates and expectations for more, however, have yet to weaken consumer spending and a scorching US labor market.

“We don’t see it materializing in our business yet,” Marriott International Inc chief executive Anthony Capuano said of the looming recession, adding, “There’s still pent-up demand.”

Major emerging markets, including China, are still expected to grow this year, albeit at a slower pace than expected.

Marcos Troyjo, chairman of the New Development Bank set up by Brazil, Russia, India, China and South Africa, said his bank still expects “robust growth” this year in China, in India and Brazil.

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Additional reporting by Jessica DiNapoli; Editing by Alexander Smith and Jan Harvey

Our standards: The Thomson Reuters Trust Principles.


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