DAVOS, Switzerland (AP) – Rising inflation. The Russian war in Ukraine. Narrow supply chains. The threat of food insecurity worldwide. The persistent pandemic of COVID-19.
The risks to the global economy are many, leading to an increasingly bleak outlook for the coming months for business leaders, government officials and other prominent figures at the annual World Economic Forum meeting in the Swiss resort of Davos . According to economists, the war has been a driving force behind the global economic recovery from the pandemic.
The managing director of the International Monetary Fund has tried to dispel the sadness this week, saying a global recession is not on the charts, but “does not mean it is beyond doubt.”
Kristalina Georgieva noted that the IMF expects economic growth of 3.6% by 2022, which is “a long way to the global recession.” But he acknowledged that it would be a “tough year” and that one of the big problems was rising food prices, partly driven by the Russian war.
“Anxiety about access to reasonably priced food is reaching the ceiling,” he said.
The brewing crisis, especially for the countries of Africa, the Middle East and Asia that depend on affordable wheat, barley and sunflower oil that Russia has blocked in the ports of the big Ukrainian producer, has been a key issue in Davos. The European Union and the United States have accused Russia of using the food supply as a weapon.
“Russia is looting Ukraine’s grain from the occupied territories, it is burning Ukrainian food warehouses in other territories, it is destroying other Ukrainian agricultural infrastructure and equipment,” European Commission Executive Vice President Valdis Dombrovskis said on a trade panel on Wednesday. “Clearly, there is deliberate action by Russia to create these global food security issues.”
If Ukraine’s supplies remain out of the market, the world could face a problem of food availability in the next 10 or 12 months, and “this will be hell on earth,” said the executive director of the World Food Program, David Beasley, at The Associated Press in Davos.
Elites gather each year to discuss ways to help save the world, although it is unclear how much concrete action the meeting will produce. Panels and announcements on Wednesday focused on the future of Europe and the Internet, helping the poorest countries with low-cost drugs and climate change, including the expansion of a public-private partnership to boost technology. green through corporate investment.
U.S. climate envoy John Kerry, Bill Gates, and Salesforce and Google officials announced that the First Movers Coalition had grown from 35 to 55 businesses. Sweden, India, Japan, Denmark, the United Kingdom and other countries also joined.
In Davos, economic and central bank officials discussed the effects of moving the abstract policy levers at their disposal, while business leaders raised concerns about the business outlook.
“As we run our business, we believe a fix is underway” in the global economy, said Pat Gelsinger, CEO of chip maker Intel, on the sidelines of the meeting.
Gelsinger said the semiconductor industry is still struggling with supply chain problems, including a slowdown in deliveries of advanced equipment used to make computer chips.
A global shortage of chips, used in everything from cars to kitchen appliances, erupted last year as demand picked up after the pandemic.
Gelsinger said Intel is better positioned than its rivals to deal with supply chain problems because it has more control over supply.
“But like everyone else, we have to face the same challenges financially,” he told a news conference.
Gelsinger said he does not expect the semiconductor industry to solve supply chain problems by 2024.
Volkswagen’s supply chain problems are easing, but it faces a huge backlog of orders. The German carmaker is seeing a “clear improvement over the summer” in the supply of microchips it needs, said President Herbert Diess.
Audi, owned by VW, has its “highest order level right now,” but customers face waiting times of a year or more, board member Hildegard Wortmann said at a of press.
The aviation industry, decimated during the pandemic as restrictions forced airlines to make ground flights and killed the demand for travel, is recovering strongly, said Hassan El Houry, CEO of National Aviation Services.
The Kuwaiti-based company offers services to airlines such as passenger check-in and airlift staff, luggage loading and unloading, and air cargo handling. It is merging with a UK rival to become the largest aviation services company in the world.
“Almost every airline I’m talking to is reporting a big boost, especially for this summer and especially on leisure travel,” El Houry said in an interview.
He predicted that the airline industry would return to pre-pandemic levels later this year or mid-next, ahead of the IATA airline group’s forecast for 2025.
However, the industry is overshadowed by losses of $ 200 billion accumulated during the pandemic. The other big problem is rising oil prices fueled by the Russian war, which will force airlines to raise fares and potentially reduce travel demand.
Fewer passengers means fewer flights to El Houry.
“Our main customers are airlines. And when the airlines feel the pressure, guess what? They will pass this pressure on us, “said El Houry.
In addition to rising fuel, food and other commodity costs that are causing a cost-of-living crisis, central banks are raising interest rates to cope with high inflation and China is experiencing a slowdown amid COVID-19 blockades, said Gita Gopinath, the IMF’s first. Deputy Managing Director.
“So we have a confluence of shocks affecting the world,” he said in a panel on global growth on Wednesday.
It is especially serious in Europe, which has revealed the war in Ukraine, European Central Bank President Christine Lagarde said on Wednesday.
“Europe is 20% more open to global value chain vulnerabilities than any other market in the world. It is therefore not surprising that the rupture and bottlenecks of global value chains are affecting companies. Europeans and us more than others, “he said.
Others highlighted the uncertainty that is shaking the financial markets and complicates investment decisions for companies.
Adena Friedman, president of the NASDAQ Stock Exchange, said Monday in a panel on the U.S. economic outlook that “a selling decision is much easier than a buying decision” for investors who can’t see where they’re going. the things.
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Associated Press journalists Jamey Keaten and Peter Prengaman in Davos and Paul Wiseman in Washington contributed.