# Economic outlook has ‘darkened’, business and government leaders warn in Davos
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-05-23
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Global Economy in Crisis: Multiple Threats at Davos
Meta Description: Discover the top threats to the global economy discussed by political and business leaders at the World Economic Forum, from inflation to geopolitical tensions.
URL: https://financedigest.com/economic-outlook-has-darkened-business-and-government-leaders-warn-in-davoshtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-05-23t140138z4lynxnpei4m0lfrtroptp4davos-meeting-1736815692682-compressed.jpg)

By Balazs Koranyi and Dan Burns

DAVOS, Switzerland (Reuters) -Multiple threats to the global economy topped the worries of the world’s well-heeled at the annual Davos think-fest on Monday, with some flagging the risk of a worldwide recession.

Political and business leaders gathering for the World Economic Forum (WEF) meet against a backdrop of inflation at its highest level in a generation in major economies including the United States, Britain and Europe.

These price rises have undermined [consumer confidence and shaken the world’s financial](https://www.financedigest.com/uk-consumer-mood-hits-one-year-high-but-financial-gloom-persists.html "UK consumer mood hits one-year high, but financial gloom persists") markets, prompting central banks including the U.S. Federal Reserve to [raise interest rates](https://www.financedigest.com/boe-raises-rates-again-as-investors-look-towards-end-of-hikes.html "BoE raises rates again as investors look towards end of hikes").

Meanwhile, the repercussions on [oil and food markets of Russia’s invasion of Ukraine in February – which Moscow describes as a “special military operation” – and COVID-19 lockdowns in China](https://www.financedigest.com/oil-steadies-after-dipping-on-china-outlook-investors-await-fed-clues.html "Oil steadies after dipping on China outlook; investors await Fed clues") with no clear end have compounded the gloom.

“We have at least four crises, which are interwoven. We have high inflation … we have an [energy crisis..](https://www.financedigest.com/europes-energy-crisis-and-the-nuclear-path-out.html "Europe’s energy crisis and the nuclear path out"). we have food poverty, and we have a climate crisis. And we can’t [solve the problems if we concentrate on only one of the crises,” German](https://www.financedigest.com/german-minister-says-on-right-track-to-solving-co2-emitting-car-row.html "German minister says ‘on right track’ to solving CO2-emitting car row") Vice Chancellor Robert Habeck said.

But if none of the problems are solved, I’m really afraid we’re running into a global [recession with tremendous effect](https://www.financedigest.com/consumer-durables-sector-still-feeling-the-effects-of-recession.html "Consumer durables sector still feeling the effects of recession") .. on [global stability,” Habeck said during a WEF panel discussion](https://www.financedigest.com/swiss-ico-summit-attracts-global-industry-leaders-to-discuss-future-of-crypto-finance.html "Swiss ICO Summit Attracts Global Industry Leaders to Discuss Future of Crypto Finance").

The International Monetary Fund (IMF) last month cut its global growth outlook for the second [time this year](https://www.financedigest.com/why-the-new-year-is-the-best-time-to-start-your-dream-tech-business.html "Why the New Year is the best time to start your dream tech business"), citing the war in Ukraine and singling out inflation as a “clear and present danger” for many countries.

IMF Managing Director Kristalina Georgieva, speaking in Daos on Monday, said the war, tighter financial conditions and price shocks – for food in particular – have clearly [“darkened” the outlook](https://www.financedigest.com/britains-next-sees-lower-profit-in-2023-as-consumer-outlook-darkens.html "Britain’s Next sees lower profit in 2023 as consumer outlook darkens") in the month since, though she is not yet expecting a recession.

Asked at a panel whether she [expected a recession](https://www.financedigest.com/german-businesses-expect-only-mild-recession-as-disruptions-ease.html "German businesses expect only mild recession as disruptions ease"), Georgieva said: “No, not at this point. It doesn’t mean it is out of the question.”

[TIPPING POINT](https://www.financedigest.com/are-we-at-a-digitise-or-die-tipping-point-in-the-telco-space.html "Are we at a ‘digitise or die’ tipping point in the telco space?")

European Central Bank (ECB) President Christine Lagarde, due to speak in Davos on Tuesday, has warned that growth and [inflation are on opposing paths](https://www.financedigest.com/analysis-central-europes-path-to-lower-inflation-strewn-with-hazards.html "Analysis-Central Europe’s path to lower inflation strewn with hazards"), as mounting price pressures curb economic activity and devastate household purchasing power.

The Russia-Ukraine war may well prove to be a tipping point for hyper-globalisation,” she said in a [blog post](https://www.financedigest.com/how-to-create-backlinks-for-your-blog-posts.html "How To Create Backlinks For Your Blog Posts") on Monday.

That could lead to [supply chains becoming less efficient](https://www.financedigest.com/2023-supply-chain-trends-for-businesses-to-ensure-a-more-efficient-supply-chain-strategy.html "2023 supply chain trends for businesses to ensure a more efficient supply chain strategy") for a while and, during the transition, create more persistent cost pressures for the economy,” Lagarde added.

Still, she essentially promised [rate hikes](https://www.financedigest.com/sp-warns-of-possible-economic-blow-hit-to-japan-inc-from-boj-rate-hike.html "S&P warns of possible economic blow, hit to Japan Inc from BOJ rate hike") in both July and September to put a brake on inflation, even if rising borrowing costs are bound to weigh on growth.

We knew, all knew from [Day One that this war](https://www.financedigest.com/covid-war-and-fed-push-world-stocks-down-for-4th-day.html "COVID, War and Fed push world stocks down for 4th day") was bad economic news. Less growth and more [inflation,” French](https://www.financedigest.com/french-inflation-revised-upwards-in-february-to-7-3-final-figures.html "French inflation revised upwards in February to 7.3% – final figures") policymaker Francois Villeroy de Galhau said. This is the [price we accepted together to pay](https://www.financedigest.com/shell-energy-to-pay-for-overcharging-price-cap-customers-ofgem.html "Shell Energy to pay for overcharging price cap customers -Ofgem") to protect our values … It was worth paying this price.”

I would play down the idea of a short-term [trade off between inflation and growth,”](https://www.financedigest.com/wyelands-bank-launches-market-leading-savings-account-to-support-trade-industrial-growth-and-job-creation.html "Wyelands Bank launches market-leading savings account to support trade, industrial growth and job creation") he said. “In the short run, our priority is clearly … [fighting inflation.”](https://www.financedigest.com/inflation-fighting-central-bankers-air-climate-role-doubts.html "Inflation fighting central bankers air climate role doubts")

While the economic drag from the Ukraine [crisis is being most keenly felt in Europe](https://www.financedigest.com/europe-burns-cash-to-help-businesses-in-deepening-energy-crisis.html "Europe burns cash to help businesses in deepening energy crisis"), it is the U.S. economy that is experiencing the greatest [price pressures](https://www.financedigest.com/heavy-norwegian-gas-maintenance-adds-to-energy-price-pressure.html "Heavy Norwegian gas maintenance adds to energy price pressure").

The [Consumer Price](https://www.financedigest.com/investors-warn-big-consumer-firms-over-price-hikes-as-competitors-gain.html "Investors warn big consumer firms over price hikes as competitors gain") Index shot from near zero two years ago to a 40-year high of 8.5% in March. The Fed responded earlier this month with its largest [rate hike](https://www.financedigest.com/hopes-of-slowdown-in-rate-hikes-bolster-shares-ahead-of-u-s-gdp.html "Hopes of slowdown in rate hikes bolster shares ahead of U.S. GDP") in 22 years, and Chair Jerome Powell has signalled increases of a similar magnitude – half a percentage point – at its next two meetings at least.

The [higher rates](https://www.financedigest.com/powells-warning-on-higher-u-s-rates-pushes-dollar-to-3-mth-high.html "Powell’s warning on higher U.S. rates pushes dollar to 3-mth high") and expectations for more, though, have yet to weaken consumer spending and a red-hot U.S. [job market](https://www.financedigest.com/ai-will-never-replace-jobs-in-the-property-market.html "AI will never replace jobs in the property market").

We’re not seeing it materialize in our [business yet,” Marriott International Inc Chief](https://www.financedigest.com/tips-for-choosing-the-right-chief-finance-officer-for-your-business.html "Tips for Choosing the Right Chief Finance Officer for Your Business") Executive Anthony Capuano said of the threat of recession, adding: “There continues to be pent-up demand.

Key emerging markets, including China, are still expected to [see growth](https://www.financedigest.com/swedish-match-continues-to-see-strong-smoke-free-sales-growth.html "Swedish Match continues to see strong smoke-free sales growth") this year, even if at a slower pace than previously estimated.

Marcos Troyjo, president of the New Development Bank set up by Brazil, Russia, India, China and [South Africa](https://www.financedigest.com/inmobi-and-coca-cola-win-mma-smarties-south-africa-award-for-beat-can-campaign.html "InMobi and Coca-Cola Win MMA SMARTIES South Africa Award for Beat Can Campaign"), said his bank still expects “robust growth” this year in China, India and Brazil.

(Additional reporting by Jessica DiNapoli; Editing by Alexander Smith and Jan Harvey)


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---