Davos: Global economic outlook looks less gloomy

Published January 21st, 2023 - 11:55 GMT
WEF sees less global gloom
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ALBAWABA — Global economic outlook remains tense, but optimistic even with the Ukraine war, an energy crisis and soaring inflation which could trigger a worldwide recession, the World Economic Forum's final panel concluded in Davos on Friday.

 

"It is less bad than we feared a couple of months ago," International Monetary Fund (IMF) Managing Director Kristalina Georgieva said at the final panel discussion.

 

Georgieva added that what had improved was the potential for China to boost growth and that the IMF now forecast growth in China to run at 4.4 percent for 2023.

 

Georgieva signaled that the IMF was likely to raise its current forecast of 2.7 percent global growth for this year when it publishes an update at the end of the month, while cautioning against expecting any "dramatic improvement" on that figure.

 

"Less bad doesn't quite yet mean good," Georgieva added. "Be careful not to get on the other side of the spectrum, from being too pessimistic to being too optimistic."

 

European Central Bank (ECB) president Christine Lagarde was similarly upbeat for the Eurozone economy, saying the "news has become much more positive in the last few weeks", shifting from talk of a recession to "a small contraction".

 

The ECB predicts 0.5 percent growth in the Eurozone in 2023, according to its latest forecast.

 

"So it's not a brilliant year but it is a lot better than what we had feared," Lagarde said, noting a drop in energy prices and a mild winter are easing fears of gas shortages following Russia's invasion of Ukraine.

 

"I do not think we're in a recession in the United States," said KPMG CEO Paul Knopp in Davos. "I actually see some pillars of strength in the U.S. when it comes to innovation, technology. The Inflation Reduction Act, actually, also helped with respect to spending in the U.S."

 

"There's no doubt that there are challenges, too, when it comes to interest rates and inflation," Knopp added. "But I am personally optimistic that there may not be a recession or, if there is one, it'll be short and shallow."

 

Many chief executive officers and other attendees agreed with Knopp, but the U.S. Treasury has its own urgent problem to deal with — raising or suspending its debt limit to avoid defaulting — which could potentially destabilize global markets and devastate not only the U.S. economy, but also drag many other economies into deep recessions.

 


 


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