The global economy is not on the brink of going bust, yet the risks are mounting and politics is the big threat.
That was the bottom line of a week spent among policy makers, investors and corporate executives at the World Economic Forum’s annual meeting in Davos, Switzerland.
“There’s always a lot of winds, but it seems to be more than average,” said JPMorgan Chase Chief Executive Officer Jamie Dimon. According to Rob Shuter, CEO of wireless carrier MTN, “people are subdued. The world is very unstable at the moment and there is no consensus on how the things affecting sentiment will play out.”
Here are the headlines as the global elite leave the Alps:
SLOWING NOT SLUMPING
There was cautious optimism that the global economy is not facing recession. The International Monetary Fund set the tone by cutting its growth forecast this year to a still fairly solid 3.5 percent. “Last year at this point in time people were almost too bullish,” Deutsche Bank CEO Christian Sewing said. “Now when I talk to people they are almost too cautious.” As for what that means for central banks, most urged them to be patient in raising interest rates although Wall Street bosses see further hikes from the Federal Reserve.
TRADE WAR WORRIES
The trade wars were unsurprisingly the main source of stress. “Part of the uncertainty and instability that we have right now is that what happens between the U.S. and China is so significant to economic growth,” said Carlos Pascual of IHS Markit. Whether or not a deal is reached was a major subject of discussion. Also worrying executives was whether the related declines in business confidence and investment could alter the long-term path of global growth.
CHINA CRISIS?
Some were more worried by the outlook for China. “The biggest story in the global economy at the moment is the Chinese slowdown,” said Adair Turner, chairman of the Institute for New Economic Thinking. Taking a bullish stance after the weakest annual expansion since 1990, Vice President Wang Qishan predicted “sustainable” growth. Business leaders used a private meeting with Chinese regulators to air concerns about how the economy is managed, while one official said more licenses for foreign banks to work in China may soon be issued.