Outlook grim for global recession, countries still in pandemic to bear maximum brunt: Leaders at WEF

Davos, May 24 (PTI) War in Ukraine, China’s strict COVID-19 measures and a host of other factors have combined to drive up inflation and raise the spectre of food insecurity, business leaders warned on Tuesday.

Speaking at the World Economic Forum Annual Meeting 2022 here, several finance leaders, central bankers and economists warned that if a recession is coming, it will mainly affect countries that have not come out of the pandemic, or are highly exposed to Russian energy, or are already in fiscal difficulties. Supply chains remain choked as many of China’s factories are still shuttered over COVID-19, markets are panicky, with technology stocks in particular in distress and inflation is running high across much of the developed world.

“We are not in a recession yet, but the signs are not good,” said David Rubenstein, Co-Founder and Co-Chairman of Carlyle. “The war is not likely to end tomorrow and it will be a precipitative factor.” “We have downgraded projections for growth for 143 countries, accounting for 86 per cent of GDP,” said François Villeroy de Galhau, Governor of the Central Bank of France. “The horizon has darkened,” he cautioned.

In addition to China’s COVID lockdowns, he cited the appreciation of the dollar and commodity price shocks in fuel resulting from the Russo-Ukrainian war. But fuel isn’t the only commodity experiencing precipitous price increases – food may prove to be even more critical. “We can shrink use of petrol,” he said, “but we have to eat every day.” He added that with inflation running at 7.45 per cent in Europe and rising, “We will have to mobilise monetary policy. There is an increase in consensus about this. In the short run, our priority is fighting inflation.” He was speaking during ‘The Global Economic Outlook’ session.

His comments came as the World Economic Forum’s Community of Chief Economists warned of “dire human consequences” from the fragmentation of the global economy. Jane Fraser, CEO of Citi, also emphasised the significance of food.

While acknowledging some bright spots – including a Middle East that, she said, is stronger coming out of lockdown and exudes optimism – she warned: “Food is, I think, the big worry because that could be the wild card, when people are hungry around the world, and there’s going to be one-and-a-half-billion hungry people without the means or the access to food, particularly in Africa,” she added. The grim outlook was also highlighted in the World Economic Forum’s quarterly Chief Economists Outlook.

Its key findings include declining real wages in both high- and low-income countries; political divisions creating geo-economic and supply chain fault lines; and persistent inflation in the United States, Europe and Latin America.