Davos 2022: economic outlook has 'darkened' amid global crises, leaders warn

A recession is not expected, but is not 'out of the question', International Monetary Fund chief says

Kristalina Georgieva, managing director of the International Monetary Fund (IMF), speaks during a panel session on the opening day of the World Economic Forum (WEF) in Davos. Bloomberg

A number of threats to the global economy topped the worries of the world's well-heeled at the annual World Economic Forum in Davos on Monday, with some flagging the risk of a worldwide recession.

Political and business leaders gathering for the event met against a backdrop of inflation at its highest level in a generation in major economies including the US, Britain and Europe.

These price rises have undermined consumer confidence and shaken the world's financial markets, prompting central banks including the US Federal Reserve to raise interest rates.

Meanwhile, the repercussions on oil and food markets of Russia's invasion of Ukraine in February, which Moscow describes as a “special military operation”, and Covid-19 lockdowns in China with no clear end have compounded the gloom.

“We have at least four crises, which are interwoven. We have high inflation … we have an energy crisis … we have food poverty and we have a climate crisis. And we can't solve the problems if we concentrate on only one of the crises,” German Vice Chancellor Robert Habeck said.

“But if none of the problems are solved, I'm really afraid we're running into a global recession with tremendous effect … on global stability,” Mr Habeck said during a panel discussion.

German chancellor Olaf Scholz speaks at the World Economic Forum in Davos, Switzerland. The annual meeting of the World Economic Forum is taking place in Davos from May 22 until May 26, 2022. AP Photo

The Mayor of Ukraine's capital Kyiv, Vitali Klitschko, addresses a news conference at the media village of the World Economic Forum (WEF) in the alpine resort of Davos, Switzerland. Reuters

German Chancellor Olaf Scholz, IMF managing director Kristalina Georgieva, European Central Bank president Christine Lagarde and WTO director general Ngozi Okonjo-Iweala join other dignitaries in Davos. EPA

Klaus Schwab, founder and executive chairman of the World Economic Forum, and German Chancellor Olaf Scholz address a plenary session. EPA

It is the 51st annual WEF meeting to be held in Switzerland. EPA

Dr Thani Al Zeyoudi, the UAE’s Minister of State for Foreign Trade, is interviewed by Bloomberg on the closing day of the Swiss summit. Bloomberg

European Commission Vice President Valdis Dombrovskis, India's Commerce Minister Piyush Goyal, World Trade Organization President (WTO) Ngozi Okonjo-Iweala and Flexport CEO Ryan Petersen take part at the panel discussion "Trade: Now what?" during the World Economic Forum 2022 (WEF) in the Alpine resort of Davos, Switzerland. Reuters

German Chancellor Olaf Scholz leaves the stage after he addressed the assembly during the WEF annual meeting. AFP

Malaysia's finance minister, Zafrul Abdul Aziz, during a panel session on the closing day of the event. Bloomberg

German Chancellor Olaf Scholz addresses the Davos assembly. AFP

Takeshi Niinami, chief executive of Suntory Holdings Ltd., during a Bloomberg television interview. Bloomberg

World Trade Organisation Director General Ngozi Okonjo-Iweala during the 51st annual event. EPA

Hossein Amir-Abdollahian, Minister of Foreign Affairs of Iran. AP Photo

Princess Haifa Al Saud, the Saudi assistant minister for tourism. AP Photo

Pfizer chief executive Albert Bourla. AP Photo

Seth Berkley, chief executive of Gavi, the Vaccine Alliance. AP Photo

Investor and philanthropist George Soros answers questions after giving a speech in Davos. AFP

Bill Gates attends a session of the 51st annual meeting of the World Economic Forum in Davos. AP

Roshni Nadar Malhotra, chairwoman of HCL Technologies, during a panel session on day two of the annual meeting of the World Economic Forum. Bloomberg

Bob Prince, co-chief investment officer at Bridgewater Associates LP, speaks during an interview at the event. Bloomberg

European Central Bank President Christine Lagarde waves as she attends the annual meeting of the World Economic Forum. EPA

Marc Benioff, billionaire and chief executive of Salesforce.com, speaks during a panel session. Bloomberg

European Commission President Ursula von der Leyen and founder and executive chairman of the World Economic Forum Klaus Schwab prepare to address the assembly in Davos. AFP

US Special Presidential Envoy for Climate John Kerry addresses a panel session during the annual meeting of the World Economic Forum. EPA

Police stand guard on a roof near where the annual meeting of the World Economic Forum is taking place. AP

Mariam Al Mheiri, Minister of Climate Change and Environment, speaking at the Averting a Global Food Crisis session at Davos. Photo: World Economic Forum Flickr

Jane Fraser, chief executive of Citi, at the Global Economic Outlook session at Davos. Photo: World Economic Forum

IMF managing director Kristalina Georgieva and governor of the Bank of France Francois Villeroy de Galhau attend a session at Davos. AFP

Sadhguru poses for a photo with a guest at the World Economic Forum in Davos, Switzerland. Photo: World Economic Forum Flickr

Gita Gopinath, economic counsellor and director of the research department at the International Monetary Fund, speaks during an interview with Reuters in the Alpine resort of Davos. Reuters

A camera crew filming the World Economic Forum in Davos. Photo: World Economic Forum Flickr

Emir of Qatar Sheikh Tamim bin Hamad al Thani addresses the assembly. AFP

(L-R) Fifa president Gianni Infantino, former Brazilian footballer Ronaldo with the World Cup trophy and former footballer and coach Jill Ellis in Davos. AFP

Wladimir Klitschko (L), Ukrainian former professional boxer and businessman, and his brother Vitali Klitschko, Mayor of Kyiv and also a former professional boxer, address a WEF panel session. EPA

Swiss Police officers on guard on a street during the WEF annual meeting in Davos. AFP

Mark Carney, vice chairman and head of transition investing at Brookfield Asset Management, on the opening day of the World Economic Forum. Bloomberg

Ignazio Cassis, President of the Swiss Confederation and federal councillor, welcomes John Kerry, US special presidential envoy for climate, in Davos. EPA

A projection is displayed advertising the 51st annual meeting of the World Economic Forum n Davos. EPA

Participants walk through the Davos Congress Centre, the venue of the annual meeting. AP

Ukraine’s President Volodymyr Zelenskyy speaks by video at the opening ceremony of the World Economic Forum in Davos, Switzerland. Reuters

Klaus Schwab, President and founder of the World Economic Forum, delivers his opening speech at the event in 2020. AP

Swiss President Ignazio Cassis addresses delegates during the opening ceremony. Reuters

Ukraine’s prosecutor general Iryna Venediktova speaks by video during the opening ceremony of the Russian Warcrimes House, a photographic exhibition documenting atrocities alleged to have been committed by Russian troops in Ukraine. The display was organised by The Victor Pinchuk Foundation. AFP

Alok Sharma, president of Cop26, is interviewed by Bloomberg on the opening day of the forum. Bloomberg

Kristalina Georgieva, chairwoman and managing director of the International Monetary Fund, is interviewed by Bloomberg Television. Bloomberg

WEF director Saadia Zahidi is interviewed by Bloomberg Television. Bloomberg

A Swiss police helicopter flies over the Alpine resort of Davos, Switzerland. Reuters

The annual WEF meeting began on Sunday and will end on Thursday. AP

German Vice Chancellor Robert Habeck, right, with Swiss ministers Simonetta Sommaruga and Guy Parmelin after a meeting held on the sidelines of the summit. EPA

Mr Habeck, Ms Sommaruga and Mr Parmelin discussed the impact of the war in Ukraine on energy supply. EPA

Ukrainian MPs Yulia Klymenko, Yevheniya Kravchuk, Anastasia Radina, Alyona Shkrum and Ivanna Klympush-Tsintsadze attend a media reception. EPA

Ms Shkrum and Ms Klympush-Tsintsadze have urged world leaders to step up sanctions against Russia. EPA

Arifin Tasrif, Indonesia’s Minister for Energy and Mineral Resources, with Simonetta Sommaruga, the Swiss Environment, Transport, Energy and Communications Minister. EPA

Google, which owns YouTube, is one of the businesses represented at the event. Reuters

Facebook owner Meta Platforms is also Davos. Reuters

The US software company Palantir Technologies has sent delegates to Davos. Reuters

Participants gather at the 51st annual WEF meeting. EPA

A robot on display in Davos. WEF delegates have gathered in person for the first time in two years. EPA

The four-day meeting of political leaders, top executives and celebrities is expected to focus on the Ukraine conflict. Bloomberg

A chef serves canapes during the WEF's welcome reception in Davos. Bloomberg

The International Monetary Fund last month cut its global growth outlook for the second time this year, citing the war in Ukraine and singling out inflation as a “clear and present danger” for many countries.

IMF managing director Kristalina Georgieva, speaking in Davos on Monday, said the war, tighter financial conditions and price shocks — for food in particular — have clearly “darkened” the outlook in the month since.

Asked at a panel whether she expected a recession, Ms Georgieva said: “No, not at this point. It doesn’t mean it is out of the question.”

European Central Bank President Christine Lagarde, due to speak in Davos on Tuesday, has said that growth and inflation are on opposing paths, as mounting price pressures curb economic activity and devastate household purchasing power.

“The Russia-Ukraine war may well prove to be a tipping point for hyper-globalisation,” she said in a blog post on Monday.

“That could lead to supply chains becoming less efficient for a while and, during the transition, create more persistent cost pressures for the economy.”

Still, she essentially promised rate increases in both July and September to put a brake on inflation, even if rising borrowing costs are bound to weigh on growth.

“We knew, all knew from day one that this war was bad economic news. Less growth and more inflation,” said Francois Villeroy de Galhau, governor of the Bank of France.

“This is the price we accepted together to pay to protect our values … It was worth paying this price.

“I would play down the idea of a short-term trade off between inflation and growth.

“In the short run, our priority is clearly … fighting inflation.”

While the economic drag from the Ukraine crisis is being most keenly felt in Europe, it is the US economy that is experiencing the greatest price pressures.

The Consumer Price Index shot from near zero two years ago to a 40-year high of 8.5 per cent in March.

The Fed responded earlier this month with its largest rate rise in 22 years, and chairman Jerome Powell has signalled increases of a similar magnitude — half a percentage point — at its next two meetings at least.

The higher rates and expectations for more, though, have yet to weaken consumer spending and a red-hot US job market.

“We're not seeing it materialise in our business yet,” Marriott International chief executive Anthony Capuano said of the threat of recession, and added: “There continues to be pent-up demand.”

Key emerging markets, including China, are still expected to see growth this year, even if at a slower pace than previously estimated.

Marcos Troyjo, president of the New Development Bank set up by Brazil, Russia, India, China and South Africa, said his bank still expects “robust growth” this year in China, India and Brazil.