Economic concerns dominate the Davos Summit-May 23, 2022 19:52

Concerns about economic domination at the Davos Summit

Concerns about economic domination at the Davos Summit

By Balazs Koranyi and Dan Burns

Davos, Switzerland (Reuters)-Multiple threats to the global economy were at the center of concern-at the center of discussions between international business representatives and political elites at the Davos Summit on Monday, some of which are the general economy. We even discussed the risk of recession.

Held at a Swiss station, the World Economic Forum is a traditional meeting of political leaders and big bosses, held when inflation in the United States was not as high as in Europe.

This surge in prices has hurt consumer sentiment, squeezed corporate profits in many sectors, and has caused some major central banks, especially the Federal Reserve Board, to embark on a cycle of interest rate hikes.

This problem was exacerbated by Russia’s military attack in Ukraine, which began on February 24, and was supplied by rising tensions on food and energy prices and China’s repeated blockades in the face of COVID-19. The chain is confused.

“We have at least four crises intertwined. We have high inflation (…) We have an energy crisis (…) We have food insecurity. And we have a climate crisis, just one of these crises. ”

“But if none of these issues are resolved, we are really afraid that we are heading straight for a global recession with enormous consequences for global stability,” said Robert Habeck, Minister of Health.・ Habeck added.

The IMF does not expect a recession “at this stage”

The International Monetary Fund (IMF) last month quoted the war in Ukraine, calling inflation a “clear and very current danger” and lowered its second global economic growth forecast this year.

Cristalina Georgieva, managing director of the IMF, said in Davos on Monday that the war, fiscal tightening, and especially price shocks to food, have clearly “darkened” the outlook since then.

But when asked if she expected a recession, she replied, “No, it’s not at this stage. It doesn’t mean it’s out of the question.”

European Central Bank (ECB) Governor Christine Lagarde, who will speak in Davos on Tuesday, said growth and inflation are heading in the opposite direction as rising prices focus on activity and reduce power household purchases. Warned.

“The war between Russia and Ukraine is likely to be a turning point in hyperglobalization,” she wrote in a blog post published on the ECB’s website on Monday.

“This can reduce supply chain efficiency for a period of time and put more sustained cost pressure on the economy during the transition,” she added.

Christine Lagarde also announced almost an ECB rate hike in both July and September to combat inflation, even if rising credit costs theoretically slowed growth.

“Everyone knew that this war was bad news for the economy, slowing growth and rising inflation,” said Francois Billroy de Garhow, Governor of the Bank of France. “This is the price we agreed to pay together to protect our values ​​(…) It was worth paying this price.”

(Edited by Jessica DiNapoli, French version of Bertrand Boucey, Nicolas Delame)