Daily Management Review

Key Development At The World Economic Forum In Davos


Key Development At The World Economic Forum In Davos
Global leaders and business executives left a freezing World Economic Forum (WEF) meeting on Friday after a candid discussion of how the world will address its most pressing issues in 2023.
Gloom and doom at the start of Davos gave way to cautious optimism by the end, with the global economic outlook for the coming year looking better than expected.
However, the annual meeting of the World Economic Forum was filled with discussion of numerous risks, including inflationary pressures from China's reopening and rising debt distress in the developing world. Not to mention that the most difficult part for Western nations is yet to come: lowering inflation to 2%.
"Things are not great, but they are much better than they could have been." - Daniel Pinto, JP Morgan's president and chief operating officer.
Davos was all about doubling down on better weapons and financial support for Kyiv's defense against Russia for Ukraine's allies. Fears of an economic downturn, however, highlighted global divisions, with some delegates urging a quick return to the negotiating table.
"This week listening to the politicians, I was surprised in a way because I got the feeling that no-one really knows exactly where we are heading and what the solutions can be." - Tanja Fajon Slovenia Deputy Prime Minister and Foreign Minister.
"If we want a negotiated peaceful solution tomorrow, we need to provide more weapons today." - NATO Secret General Jens Stoltenberg.
Be wary of friendshoring, WTO's Ngozi Okonjo-Iweala warned as the world's three largest trading powers, the United States, Europe, and China, pushed their new industrial policies.
What was unclear was how the rest of the world would respond to new trade policies that protect workers and restructure supply chains.
"This becomes a rich-country game, right? We can subsidize this, you can subsidize that – what about the poor countries, who have limited fiscal room? They get left out in the cold." -Raghuram Rajan, former governor of the Reserve Bank of India.
The carbon crowd was greeted warmly as executives from the renewable industry mingled with those from Big Oil. After a year of high oil prices, fossil fuel producers have the cash to invest in green energy. However, progress on CEO green pledges and climate financing appeared to be slow.
Outside, Greta Thunberg and other activists urged the energy industry to stop sabotaging the transition to clean energy. Inside, political leaders such as Kier Starmer railed against new oil investments, while Pakistani climate minister Sherry Rehman advocated for loss and damage funding.
"How do we get there? The lesson I have learned in the last years ... is money, money, money, money, money, money, money." - U.S. climate envoy John Kerry on meeting the Paris Agreement's global warming target.
Davos contrasted the industry's potential and risk.
Just as Microsoft Corp.'s CEO and other Silicon Valley executives lauded artificial intelligence like ChatGPT for transforming their businesses, they announced global layoffs of tens of thousands of employees. Businesses' once high-flying cloud spending was being scrutinized.
Companies are "cost-cutting measures are in place. They must find ways to do the same things for less money." - Alex Karp, Palantir Technologies' CEO
China declared itself open for business in a speech by Vice-Premier Liu He, which was widely welcomed but also raised inflationary concerns and left people wondering what this would mean for existing tensions with the US.
"The growth forecasts now for China is 4.5%. I would not personally be surprised when that would be topped." - Credit Suisse Chairman Axel Lehmann.
The Europeans had plenty to complain about when it came to America's Inflation Reduction Act, which was dubbed a gamechanger for climate change by IEA head Fatih Birol.
The European Union announced that it would mobilize state aid and a sovereignty fund to prevent firms from relocating to the United States.
"The key question is not China First, US First, Europe First. The key question for all of us is Climate First." - French economy minister Bruno Le Maire.
Global financial institutions are pondering how to right-size for a slowdown while contending with a slew of other challenges. With the threat of inflation still looming over central banks, financiers are facing regulatory demands for higher capital levels in order to prepare for a downturn, which could render some businesses unprofitable.
Pressure is also mounting on them to finance the global transition to a greener future much more quickly than they have in the past. Other exogenous events, such as geopolitics and cybersecurity threats, are complicating matters further. Consensus is difficult to come by.
"We shall stay the course until such a time when we have moved into restrictive territory for long enough so that we can return inflation to 2% in a timely manner." - Christine Lagarde.