SUMMARY OF THE WORLD ECONOMIC FORUM ANNUAL MEETING
The WEF is mostly known for its annual meeting at the end of January in Davos, a mountain resort in the eastern Alps region of Switzerland. We’ve been bringing you updates as regards this meeting, which started on the 16th and finally came to an end on Friday 20th January 2023– a conference whose processes and outcomes remain pretty much business as usual. On the economy front, many seemed to believe the worst was behind them with the global economic outlook for the year ahead looking better than feared. On climate, there was much talked about but little action. Engulfed with cash after a year of high oil prices, fossil fuel producers have the firepower to invest in green energy. But efforts on CEO green pledges and climate financing appeared sluggish. Political leaders like Kier Starmer railed against new oil investments and Pakistani climate minister Sherry Rehman pushed for loss and damage funding.
Russian oligarchs, usually prominent in the annual summit, were absent this year, even as Ukraine made a strong pitch for more aid, both military and financial. For Ukraine’s allies, Davos was all about doubling down on better weapons and financial support for Kyiv to defend itself against Russia. Outside the West though, fears of an economic downturn highlighted global divisions as some delegates encouraged a quick return to the negotiating table.
On TRADE WTO‘s Ngozi Okonjo-Iweala
Warned, Be careful of friendshoring, as the big three trading powers of the United States, Europe and China pushed their new industrial policies. What was not clear was how the rest of the world fits in to new trade policies that protect workers and redefine supply chains. Raghuram Rajan, former governor of the Reserve Bank of India complained of the fact that subsidy doesn’t quite work well with every nation as poor countries who have limited fiscal room get left out in the cold. Most business leaders were upbeat about the economy, with the US and the European Union (EU) seemingly beyond the risk of a recession now. China ending its zero Covid curbs and opening shop again added to the positive outlook.
CHINA AND INFLATION: China declared itself open for business in a speech by Vice-Premier Liu He that was broadly welcomed but also raised inflationary fears and left people waiting to see what this would mean for existing tensions with the United States. Indeed, Chinese Vice Premier Liu He made a strong pitch about his country’s opening up, saying a “noticeable increase of import, more investment by companies, and consumption returning back to normal can be expected” in 2023. In Liu’s address on January 17th, he said “If we work hard enough, we are confident that in 2023, China’s growth will most likely return to its normal trend,”. Many also pointed out that China opening up could mean a rise in its energy consumption, thereby driving up energy prices.
The WEF‘s annual meeting was filled with discussion of plenty of risks, including inflationary pressures from China’s reopening and rising debt distress in the developing world. Not to mention that the hardest bit for Western nations is yet to come – getting inflation down to 2%. However, central banks of the major economies cautioned that concerns still remained, and said they would keep interest rates high to ensure inflation is under check. Just as Microsoft Corp’s CEO and other Silicon Valley executives touted artificial intelligence such as ChatGPT to transform their businesses, they announced layoffs of tens of thousands of employees globally. Scrutiny of once high-flying cloud spending by businesses was at the forefront.
Alex Karp, CEO of Palantir Technologies suggested
Businesses are “under enormous cost pressure. And so need to find ways to do the same things cheaper.” AND ROUNDING IT ALL UP, FINANCIAL SERVICES: Global financial institutions are grappling with how to right-size for a slowdown, while dealing with a host of other headwinds. With the threat of inflation still hanging over central banks, financiers are facing demands from regulators for higher capital levels to prepare for a downturn, making some businesses unprofitable. Pressure is also increasing on them to finance the global transition to a greener future much faster than they have been doing so far. Other exogenous events such as geopolitics and cybersecurity risks are further complicating matters. Consensus is elusive.
