The perspective of a world recession The impending threat cast a shadow over Davos on Monday as participants gathered for the opening of the World Economic Forum’s annual meeting calculated the likely cost to their businesses and production.
Two-thirds of the top public and private sector economists surveyed by the World Economic Forum They expect a global recession this year, with around 18% considering this scenario “extremely likely”, more than double the number in the previous survey conducted in September 2022.
“The current environment of high inflation, low growth, high debt and fragmentation reduces the investment incentives needed to return to growth and raise living standards for the world’s most vulnerable,” said World Economic Forum Managing Director, Saadia Zahidiin a statement that accompanied the survey results.
The survey of World Economic Forum was based on 22 responses from a group of senior economists from international organizations, including the International Monetary Fundinvestment banks, multinationals and reinsurance groups.
Last week, the World Bank cut its 2023 growth forecasts to near-recession levels for many countries as the impact of central bank rate hikes intensifies, the Russian war in Ukraine and the main economic engines of the world are weakened.
Definitions of what constitutes a recession differ around the world, but generally include the prospect of contracting economies, possibly with high inflation in a “stagflation” scenario.
On inflation, the Davos survey noted large regional variations: the proportion expecting high inflation in 2023 ranged from just 5% in China and 57% in Europewhere the impact of last year’s rise in energy prices has spilled over into the broader economy.
Most economists expect further tightening of monetary policy in Europe Y USA (59% and 55%, respectively), with policy makers caught between the risks of going too hard or too little.
“It is clear that there is a massive drop in demand, inventories are not being cleared, orders are not coming in,” Yuvraj Narayan, deputy chief executive and chief financial officer of Dubai-based global logistics company DP World, told Reuters.
Avoid layoffs
Few sectors expect to be totally immune.
Matthew Prince, CEO of the cloud services company Cloudflare Inc.said internet activity pointed to an economic slowdown.
“Since the New Year, when I catch up with the CEOs of other tech companies, they say, ‘Have you noticed the sky is falling?'” he told Reuters.
Jenni Hibbert, a partner at Heidrick & Struggles in London, said activity was normalizing and the executive search firm was seeing “less flow” after two years of strong growth.
“We’re hearing the same mixed perspective from most of our clients. People are expecting a more challenging market,” Hibbert told Reuters.
aid cuts
Nowhere is the impact of the recession on the world more tangible than in efforts to address the poverty.
Peter Sands, executive director of the Global Fund to Fight AIDS, Tuberculosis and Malaria, said foreign aid was being cut in budgets as donors begin to feel the pinch as the recession it will hit the local health provision hard.
A common concern among many Davos participants was the high level of uncertainty for the coming year, from the length and intensity of the Ukraine war to the next moves by major central banks seeking to reduce inflation with sharp rate hikes.
The chief financial officer of a publicly traded US company told Reuters it was preparing widely mixed scenarios for 2023 in light of economic uncertainty, much of it related to the trend in interest rates this year.
“I want the outlook to soften a bit so that the US Federal Reserve rates start to come down and all the liquidity absorption by central banks eases up,” Sumant Sinha, president and CEO of the group, told Reuters. Indian clean energy company ReNew Power.
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