DAVOS, Switzerland ( Associated Press) — Rising inflation. Russian war in Ukraine. Squeezed supply chain. The threat of food insecurity around the world. The lingering COVID-19 pandemic.
The risks to the global economy are many, and this has led to a gloomy look about the coming months as corporate leaders, government officials and other VIPs gather in Davos, Switzerland, for the annual meeting of the World Economic Forum.
The International Monetary Fund’s managing director sought to allay the gloom during an economic panel this week, saying a global recession is not in the cards, but “that doesn’t mean it’s out of the question.”
Kristalina Georgieva noted that the IMF last month forecast economic growth of 3.6% for 2022, which is “a long way from a global recession”. But she acknowledged it is going to be a “tough year” and that one of the bigger problems is rising food prices, partly driven by the Russo-Ukraine war.
“Globally the concern about access to food at reasonable prices is on the roof,” she said.
The wine-making food crisis – especially for countries in Africa, the Middle East and Asia that depend on cheap wheat, barley and sunflower oil blocked in ports of major producers Ukraine – has been a major theme in Davos.
European Commission President Ursula von der Leyen accuses Russia of deliberately bombing grain warehouses in Ukraine and using the food supply as a weapon.
Furthermore, “Russia is now hoarding its own food exports in the form of blackmail – withholding supplies to prop up global prices, or trading wheat in exchange for political support,” said an EU executive. Branch chief von der Leyen said. “It is using hunger and grain to gain power.”
The elite, who squabble every year about ways to help save the world, are also focusing on Europe and the future of the Internet on Wednesday, helping poor countries with low-cost medicineand climate changeIncluding the expansion of a corporate effort to decarbonize the economy.
While there are several panel discussions and announcements, it is not clear how concrete action the meeting takes.
In Davos, economic and central bank officials debated the implications of shifting the intangible policy levers at their disposal, while company owners outlined their concerns about the business outlook.
“As we run our business, we think the recovery in the global economy is now well underway”, said chipmaker Intel CEO Pat Gelsinger on the sidelines of the meeting.
Gelsinger said the semiconductor industry is still grappling with supply chain issues, including a slowdown in the delivery of advanced equipment used to manufacture computer chips.
Global shortages of chips, used in everything from cars to kitchen appliances, fueled a demand recovery after the pandemic last year.
Gelsinger said Intel is in a better position than rivals to handle supply chain issues because it has more control over sourcing.
“But like everyone else, we are facing the same challenges financially as others,” he said at a press roundtable.
Gelsinger said he does not expect the semiconductor industry to operate in the supply chain until 2024.
National Aviation Services CEO Hassan El Hori said the aviation industry, due to travel restrictions during the pandemic that forced airlines to ground flights and killed demand for business and leisure trips, is rebounding strongly.
The Kuwait-based company provides services for airlines such as passengers to check in and to and from aircraft, baggage loading and unloading, and staff to handle air cargo. It is merging with a UK rival to become the world’s largest airline.
“Almost every airline I talk with is reporting a huge rebound in leisure travel in particular for this summer and in particular. So it’s a positive note,” El Hori said in an interview.
He predicted that the airline industry would return to pre-pandemic levels before airline industry group IATA’s forecast for 2025.
“I think it could be very early. I think the end of 2022, maybe, you know, in the middle of 2023, we will see volumes back to 2019 levels,” he said.
However, the aviation industry is still reeling under $200 billion in losses incurred during the pandemic. Half of this is government grants and loans that need to be repaid, he said.
The other big problem is the surge in oil prices from the Russo-Ukraine war, which will force airlines to raise airfares – and potentially reduce demand for travel. Fewer air passengers means that El Hori’s company operates fewer flights.
“Our biggest customers are the airlines. And when the airlines are feeling the pressure, guess what? They are going to pass that pressure on to us,” El Houri said.
Davos-goers had a pessimistic view of the global economic outlook, if a straw poll is anything to go by during a session on the global economic outlook on Monday.
At the start of the session, a moderator asked the audience if they thought a recession was likely. Most of the crowd of about 100 raised their hands.
While IMF chief Georgieva downplayed hopes of a recession, she listed several challenges: rising interest rates, inflation, a stronger dollar, a slowdown in China, the climate crisis, and a recent “rough spot” for cryptocurrencies.
Others highlighted the uncertainty that is pounding financial markets and complicating investment decisions for businesses.
Adena Friedman, president of the NASDAQ stock exchange company, said “a sell decision is much easier than a buy decision” for investors who can’t see where things are going.