If none of the problems are resolved, I am really afraid that we are going to enter a global recession with a tremendous effect on global stability.”
Robert Habeck, Vice Chancellor of Germany
Multiple threats to the global economy topped the concerns of political and business leaders gathered at the annual summit in Davos, Switzerland, with some even citing the risk of a global recession.
The World Economic Forum (WEF) is taking place this year in a context in which inflation has reached its highest level in a generation, including economies such as the United States, the United Kingdom and Europe.
These price hikes have sapped consumer confidence and rattled global financial markets, prompting central banks, including the US Federal Reserve, to raise interest rates.
Meanwhile, repercussions on oil and food markets from Russia’s invasion of Ukraine in February and lockdowns from new waves of Covid-19 in China aggravated pessimism.
“We have at least four crises, which are intertwined. We have high inflation (…) an energy crisis, food poverty and a climate crisis. And we cannot solve the problems if we concentrate on just one of them,” said German Vice Chancellor Robert Habeck.
“However, if none of the problems are resolved, I am really afraid that we are going to enter a global recession with a tremendous effect on global stability,” Habeck warned during a WEF roundtable.
The President of the European Central Bank (ECB), Christine Lagarde, who will speak today in Davos, has warned that growth and inflation are going in opposite directions, since the increasing pressures on prices slow down economic activity and devastate the purchasing power of the homes.
“The war may be a turning point for hyperglobalization,” he posted in a blog. “That could make supply chains less efficient for a while and, during the transition, create more persistent cost pressures for the economy.”
Still, he essentially promised rate hikes in both July and September to rein in inflation, even if rising borrowing costs will weigh on growth.
In a report published by Oxfam, 263 million people are expected to fall into extreme poverty this year, that is, one million every 33 hours.
A rate that the organization compares to the creation of a new billionaire every 30 hours during the pandemic.
“Billionaires flock to Davos to celebrate an incredible rise in their fortunes,” Oxfam’s Gabriela Bucher said in a statement.
Dark horizon for the world economy: IMF
“The horizon has darkened” for the world economy, lamented the managing director of the International Monetary Fund (IMF), Kristalina Georgieva, but ruled out the risk of a recession.
“It will be a difficult year,” he warned at a debate on the world’s economic outlook, where he said the consequences of the war are still uncertain. “We are experiencing a shock in the prices of basic products, in particular food, which are skyrocketing to an unprecedented level.”
Asked about the risks of a global recession, she said that it is not on the horizon “for the moment”. (AFP)