Fear of recession grips Davos Forum executives

The executives and organizers of the World Economic Forum (WEF) do not like to convey a pessimistic image about the prospects for the coming months, which would doubly harm their business;

but on this occasion they cannot avoid conveying their concern about the fact that the worst case scenario – an economic recession like the next plague after the health crisis and a war of uncertain duration – has a serious chance of becoming a reality.

“The tightening of financial conditions, the rise of the dollar, the economic slowdown in China and inflation mean that the rest of the year is going to be very hard.

We calculate that the global economy will still grow 3.6% this year on average, but that means that there will be countries that enter a recession”,

“If the war in Ukraine ended tomorrow, I would say there will be no recession.

But with a conflict that seems to go on for a long time, the war can precipitate the red numbers”, insisted David Rubenstein, CEO of The Carlyle Group.

Beside her, Citi CEO Jane Fraser nodded.

“Because of the proximity to Russia, our main concern is Europe.

I am convinced that Europe will enter a recession”, she pointed out.

Even the founder of the WEF, Klaus Schwab, recognized in his words of welcome the difficult times the world economy is going through —with “high inflation, low growth and high debt”— and the risks that this situation entails.

A survey of chief economists around the world carried out by the WEF shows a rather pessimistic scenario.

The combination of lower economic activity, higher inflation, lower real wages and increased food insecurity will have “devastating” consequences for a significant part of the population.

"The decisions of companies and governments are expected to lead to further fragmentation of the global economy and unprecedented changes in supply chains, creating a perfect storm of volatility and uncertainty," concluded the quarterly report by the chief economists of the Davos Forum, published this Monday.

“We are on the cusp of a vicious cycle that could affect societies for years.

In these circumstances, the fear that the central banks arrive too late to correct the monetary stimuli and end up causing a recession is growing.

The governor of the Bank of France, François Villeroy de Galhau, a member of the council of the European Central Bank (ECB), marked the distance between the situation in the US and that of the euro zone and insisted that it is "idle to think that a accommodative policy maintained for so long was not going to bring inflation”.

"Interest rates must be normalized to redirect price growth, especially with regard to the underlying rate," he added.

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