The spotlight is on many of the world’s business leaders this week as they gather in the Swiss mountaintop town of Davos to attend the annual World Economic Forum. And they are not in a good way. Their gloomy outlook on the future prospects of their own companies paints a grim picture for the rest of the world economy. But there’s just one thing: A lot of economic news these days is pretty, really good.
The theme of this year’s event is a forebonding term from the academy: polycrisis. It made it popular probably the biggest wonk on the internetprofessor at Columbia Adam Toozeand raised by Nouriel “Dr. Destruction” Roubini, it refers to when the world does not have just one crisis but many that affect each other, with extraordinary economic results. The WEF Warned in a report last week that a period of polycrisis could begin within the next decade. The report actually found that the current period, characterized by climate change, the war in Ukraine, and persistent inflation, are only the first seeds of bigger crises to come. The CEOs gathered in Davos seem unaware, however, that the world is showing signs of avoiding a recession, let alone a polycrisis.
In the US, rising fears of a looming economy already prompting waves of removals that affected tech and bank employeesas more and more companies find ways to lower or reduce spending. Yet many economists and business leaders say the US is likely to avoid a full-blown recession, including Moody’s chief economist Mark Zandi, although they admit that long period of slow to no economic growth could be on the cards.
For now, the data suggest that a long-term economic downturn is unlikely. In the US, while some sectors have started to lay off jobs, strong labor market accompanied by rapid decline in inflation suggests that many Americans are still doing well, undermining the chances of a deep and long recession. Even in Europe, where economic exposure to the Ukraine War is particularly high, a severe recession may at least be delayed as the continent looks to avoid a major energy crisis this winter. Goldman Sachs recently modified its economic forecasts for Europe in a positive direction, pointing to the fall in energy prices and the more rapid opening of China than expected.
Even in gloomy Davos, many CEOs are focusing on China’s long-term expectations lift in December’s COVID-zero policies and reopening the world earlier this month as a potential tailwind for the global economy once the expected wave of infections in the country passes.
Mathias Cormann, secretary-general of the OECD, said his organization was “very happy[s]” China’s removal of COVID-zero policies in a interviews with CNBC from Davos on Monday, adding that the reopening will be “very positive” for the rest of the world as central banks try to lower inflation.
“In the short term, it comes with challenges and we’re seeing high levels of infection that are likely to have some short-term effects,” he said. “But in the medium to longer term, it’s a very positive thing in terms of making sure that supply chains work more efficiently and more effectively, making sure that China’s demand and actually trade in usually maintain a more positive pattern.”
Yet for the most part, the CEOs attending Davos chose to see the glass as half empty. as luckof Alan Murray writes in CEO Daily on Tuesday, a whopping 40% of CEOs surveyed by PwC were pessimistic about their own companies’ chances of survival a decade from now.
The C-suite just isn’t buying the (good economy) hype.
In Davos, the leaders’ conversations so far have been full of negative views for the coming year, as the obstacles to economic growth seem unlikely to be overcome soon.
“The mood is somber,” Nick Studer, CEO of the Oliver Wyman Group consultancy, spoke to Wall Street Journal at the conference. “At the same time, there are many people who hope that the environment in the US and UK – if it is recessionary – will be short or shallow.”
While Davos organizers and activists are urging business leaders to begin weighing long-term risks more heavily, many still need to manage short-term global developments. economic growth, and most of them expect a change this year. More than 70% of CEOs surveyed by PwC predict an economic downturn in the coming year.
“I’m pessimistic about the near future and very optimistic about what we can do to help that,” Alex Karp, CEO of data analytics firm Palantir Technologies, told CNBC in Davos on Tuesday.
“We have just learned, as world organizations, that we live in a world that is very different from what we thought,” he said, adding that some factors that drag down the world economy, such as the War in Ukraine, is unlikely to disappear anytime soon. soon.
Another factor hurting global growth is inflation, which ran at its highest rate in decades in many countries last year and ruining the finances of many middle-class households in the US Inflation in the US recently go down steeply and many economists even suggest US inflation beyond its peakbut some CEOs at Davos remain bullish on the chances of an inflationary slowdown anytime soon for consumers.
“We are probably, at the moment, around peak inflation, but maybe not peak prices,” Alan Jope, CEO of the consumer goods behemoth Unilever, told CNBC in Davos. “There will be more pricing to come, but the rate of price increase is probably peaking now.”
Many CEOs cite the unpredictability of today’s times, as today’s business leaders struggle with how to manage the world’s increasingly conflicting crises.
“No one doing business these days has really lived through global inflation, it’s been a long time since we’ve had global inflation,” said Jope. Palantir’s Karp also says that the main factor hurting the economy right now is that the business is in an “unknown place where things happen that we didn’t plan for, like wars, trying to facing wars, and inflation.”
While most CEOs are pessimistic, others argue that age and business experience is an important factor, something many of today’s young leaders lack.
“If you talk to people on Wall Street who are 35 and older, they think it’s the end of the world,” said Steven Bergman, CEO of the dental products supplier. Henry Scheinspoke to Journal in Davos. “You’re talking to people who are 50 and over, we’ve been through this many times.”
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