Is it good news, or bad, for organisers of the annual Alpine extravaganza in Davos that the world is in the midst of a financial meltdown even as the delegates fly in?
The market convulsions of 2016 have certainly provided food for thought and debate among the masters of the universe who are making their way to the 46th World Economic Forum (WEF), and guaranteed that the TV cameras will put them under even more intense scrutiny than usual.
After all, if you want to predict the future of the global economy, who better to ask than the people who control it?
You could also argue that the WEF model – of private-public cooperation rather than exclusively government-sponsored talking shops – is the appropriate way to tackle big global problems.
After the success of the UN-promoted Sustainable Development Goals initiative, paving the way for the Paris Climate Change breakthrough last year, the rather more informal private template pioneered by WEF looks a better bet than, say, the moribund, government-interfacing Doha Round formula favoured by the World Trade Organization.
On the other hand, the WEF approach does have its drawbacks. It has to prepare its agenda well in advance, and alighted on “The Fourth Industrial Revolution” as the theme for Davos 2016. That’s exactly the kind of long-term, visionary perspective WEF loves, and is a particular pet of Klaus Schwab, the founder and (still) executive chairman of WEF.
It’s just that, with financial markets collapsing, oil falling off a cliff, the Chinese economy looking more fragile by the day, and worries that the US Federal Reserve made a big mistake when it raised interest rates last year, not many Davos delegates will be thinking of the day when robots rule the world.
I certainly won’t. Here, in more or less order of importance as I rate it for the Arabian Gulf region, is what I hope to learn from the WEF this year.
1. When will the oil price pull out of its nosedive?
At Davos last year, when oil had already halved from its 2014 peak, there was general joy, especially from European and American delegates, that the oil exporters were getting their comeuppance after years of alleged rip-off. Now as the financial consequences of low oil become apparent for their economies and energy corporates, to say nothing of the global economy, will they admit that the fall has gone too far? Will oil come back before it hits the “doomsday” level of US$10 per barrel?
2. What path will Saudi Arabia take in 2016?
The Saudis have a top-level delegation at Davos, and it was thought at one stage they would unveil the long-awaited National Transformation Plan there. Events in Iran and Yemen may have postponed that, but nonetheless Davos will want to hear what Saudi is planning for its economy, which of course has direct repercussions on the oil price. Will there be a “Big Bang” programme of privatisation, with a Saudi Aramco IPO, or a more gradual sell-off of state assets? And will there be a return to comparative normality in relations with Iran?
3. What is really going on in China?
The fragility of the country’s economy and financial markets have been brutally exposed in the first few weeks of the year, but the authorities there insist it is on track to show GDP growth of just a little less than 7 per cent. That is well down on the past decade, but still better than any other major economy, apart from India. But can the official figures be trusted? Is there a “black swan” waiting to hit China and bowl over the rest of the global economy in the process?
4. Will the Fed change its mind on interest rates?
There is as usual a big American contingent, under the vice president Joe Biden and secretary of state John Kerry. Janet Yellen, the chairwoman of the Federal Reserve, is not on the guest list, although I doubt she’d be turned away at the door if she decided to put in a late show. But since she signalled a new era of higher interest rates last month, the world economy has bombed. Will she admit it was a mistake? Will she, or her Davos representative, indicate that there will be no further tightening as long as the global fragility lasts?
If Davos man gets answers to those four questions, he’ll begin thinking about The Fourth Industrial Revolution.
fkane@thenational.ae
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