Galloping inflation. Russia’s war in Ukraine. Compressed supply chains. The threat of food insecurity in the world. The ongoing COVID-19 pandemic.
The risks to the global economy are plentiful, and that has led to an increasingly bleak outlook for the months ahead as business leaders, government officials and other figures gather in Davos, Switzerland, for the annual meeting of the World Economic Forum (WEF).
The managing director of the International Monetary Fund sought to dispel the gloom during an economics 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 predicted economic growth of 3.6% for 2022, which is “a long road to global recession”. But she acknowledged that it’s going to be a “difficult year” and that one of the big problems is soaring food prices, partly fueled by the Russian-Ukrainian war.
“Anxiety over access to reasonably priced food around the world is reaching fever pitch,” she said.
The brewing food crisis – especially for countries in Africa, the Middle East and Asia that depend on affordable wheat, barley and sunflower oil that are stuck in ports from the main producer Ukrainian – was a key topic in Davos.
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European Commission President Ursula von der Leyen has accused Russia of deliberately bombing grain warehouses across Ukraine and using the food supply as a weapon.
On top of that, “Russia is now hoarding its own food exports as a form of blackmail – by stifling supplies to raise world prices or swapping wheat for political support,” von der Leyen said, Chief Executive of the European Union. “It is to use hunger and grain to exercise power.”
The elites who gather every year on ways to help save the world are also focusing Wednesday on the future of Europe and the internet, helping poorer countries with low-cost medicines, and on climate change, including the expansion of a corporate effort to decarbonize the economy.
Although there are many roundtables and announcements, it is unclear how much concrete action the meeting will produce.
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In Davos, economic and central bank officials debated the effects of shifting the abstract policy levers at their disposal, while business leaders raised concerns about the business outlook.
“As we run our business, we believe a correction is now well underway” in the global economy, said Pat Gelsinger, CEO of chipmaker Intel, on the sidelines of the meeting.
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Gelsinger said the semiconductor industry is still grappling with supply chain issues, including a slowdown in shipments of advanced equipment used to manufacture computer chips.
A global shortage of chips, used in everything from cars to kitchen appliances, erupted last year as demand rebounded from the pandemic.
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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 face the same economic challenges as everyone else,” he said during a roundtable with the press.
Gelsinger said he doesn’t expect the semiconductor industry to fix supply chain issues until 2024.
The aviation industry, decimated during the pandemic as travel restrictions forced airlines to ground flights and killed demand for business and leisure travel, is rebounding strongly, said Hassan El Houry, CEO of National Aviation Services.
The Kuwait-based company provides services to airlines, such as staff to check in passengers and shuttle to and from planes, load and unload baggage, and handle air cargo. It merges with a British rival to become the largest aviation services company in the world.
“Almost every airline I speak with is reporting a huge rebound, especially for this summer and especially for leisure travel, so that’s the positive note,” El Houry said in an interview.
He predicted the airline industry would return to pre-pandemic levels sooner than the IATA airline industry group forecast for 2025.
“I think it could be a lot sooner. I think late 2022, maybe, you know, mid-2023, we’ll see volumes come back to 2019 levels,” he said.
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However, the aviation industry is still overshadowed by $200 billion in losses accumulated during the pandemic. Half of that is made up of government grants and loans that have to be repaid, he said.
The other big issue is soaring oil prices fueled by the Russian-Ukrainian war, which will force airlines to raise airfares – and potentially reduce travel demand. Fewer air passengers means that El Houry’s company serves fewer flights.
“Our biggest customers are the airlines. And when airlines feel the pressure, guess what? They are going to pass that pressure on to us,” El Houry said.
Onlookers at Davos had a gloomy view of the global economic outlook, if a straw poll during a session on the global economic outlook on Monday is anything to say.
At the start of the session, a moderator asked the audience if they thought there was a risk of a recession. Most of the crowd of around 100 raised their hands.
While IMF chief Georgieva stifled expectations of a recession, she listed a host of challenges: rising interest rates, inflation, a stronger dollar, a slowdown in China, climate crisis and a recent “tough point” for cryptocurrencies.
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Others pointed to the uncertainty rocking financial markets and complicating corporate investment decisions.
Adena Friedman, president of stock exchange NASDAQ, said “a sell decision is much easier than a buy decision” for investors who don’t see where things are going.
Associated Press reporters Jamey Keaten and Peter Prengaman in Davos and Paul Wiseman in Washington contributed
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