Hoor Asrar describes the despondency in the Swiss resort
The visitors to Davos worries appear despondent this time of the year expressing a pessimistic views about the global economic outlook and showing strong concerns about the state of global economy. The sentiment was apparently conveyed by a random assessment of the situation whereby most of the participants opined that the chances of a global recession are growing strong by the day. Despite assurances to the contrary offered by IMF chief, soaring inflation, Russia’s war in Ukraine, squeezed supply chains and the threat of food insecurity around the world dominated almost all themes at Davos. The IMF chief, though, reassuring, did concede the challenges faced by the world including rising interest rates, inflation, the strengthening dollar, a slowdown in China, the climate crisis and a recent rough spot for crypto-currencies. Other participants highlighted the uncertainty that is rattling financial markets and complicating investment decisions for businesses.
The celebrated World Economic Forum in Davos this year presented a gloomy picture with deep concerns exhibited about the future economic activities. However, the most reassuring views were expressed by the MD IMF who maintained that global recession is not on the cards but conditioned this assertion by adding that the recession prospects cannot be ruled out. MD IMF Kristalina Georgieva noted that the IMF last month forecast 3.6% economic growth for 2022 which is a long way to global recession though times are tough as all economic aspects are facing extreme difficulties particularly the food sector for which she has asked for subsidising food items.
The brewing food crisis — especially for countries in Africa, the Middle East and Asia that rely on affordable wheat, barley and sunflower oil that are blocked in the ports of major producer Ukraine — has been a key topic in Davos. European Commission President Ursula von der Leyen accused Russia of deliberately bombarding grain warehouses across Ukraine and using food supplies as a weapon. She also mentioned that Russia is now hoarding its own food exports as a form of blackmail — holding back supplies to increase global prices, or trading wheat in exchange for political support adding that Putin is using hunger and grain to wield power.
The Davos gathering this year was predominantly concerned about the future of Europe and also about the future of the internet. The forum also deliberated measures to help poorer countries with low-cost medicine and also to facilitate supplies accordingly. Climate change also was a point of discussion including an expansion of a corporate effort to decarbonise the economy. Though many subjects were discussed but there is always a litmus test for judging the implementation levels and Davos’ record in this context is, at best, mixed. Despite such shortcomings Davos is a welcome addition in policy-setting forums and it produces more results than usually expected.
The other big problem is the surge in oil prices fueled by the Russia-Ukraine war, which will force airlines to raise airfares and potentially dampen travel demand. The aviation industry, decimated during the pandemic as travel restrictions forced airlines to ground flights and killed demand for business and leisure trips, is reportedly rebounding strongly. It is reported that almost every airline is reporting a huge rebound, especially for this summer and particularly in leisure travel. In this context it is predicted that the airline industry would return to pre-pandemic levels earlier than airline industry group IATA’s forecast of 2025. However, the aviation industry is still overshadowed by $200 billion worth of losses racked up during the pandemic out of which half of that is government grants and loans that need to be repaid.
One issue that raised quite a discussion was raised by chipmaker Intel stating that the semiconductor industry is still grappling with supply chain issues, including a slowdown in deliveries of the advanced equipment used to manufacture computer chips. A global shortage of chips, used in everything from cars to kitchen appliances, erupted last year as demand recovered after the pandemic. Intel stated that it does not expect to remove impediments in the supply chain by 2024.
The subdued emotions at Davos this time round were reflected by many operators of stock exchange business that a selling decision is much easier than a buying decision for investors. The overall economic depression has created a curious kind of uncertainty that appears all-pervasive and is conveying negative vibes. The World Economic Forum appears to be imbued with a typical negativity that is reflected in the drift of most of the discussions that were always found to be upbeat in the past. European sentiment is particularly depressed as the continent is facing the resurgence of Cold War type of upheaval as Russia has started to reassert its geopolitical demands though they are considered outdated and out of sync with the current times. TW