This year’s World Economic Forum, in Davos, kicks off against a backdrop of growing pessimism — with the IMF saying global growth appears to have bottomed out with no rebound in sight; and CEO confidence in the world’s economy hitting a record low.
On the eve of Davos, the IMF trimmed back its global growth forecasts for 2020 and 2021, mostly due to a sharper-than-expected slowdown in India and other emerging markets, even as it said that a US-China trade deal added to hopes the activity was bottoming out. Trade tensions and climate shocks make the outlook more uncertain, it said.
With trade wars weighing on exports and investment, the global economy expanded by 2.9% last year, its slowest pace since the global financial crisis, despite near synchronised central bank easing that added half a percentage point to global growth.
“We have not reached a turning point yet,” IMF managing director Kristalina Georgieva said. “The reality is that global growth remains sluggish.”
“Just in the very first weeks of the new year we have witnessed increased geopolitical tensions in the Middle East and we have seen the dramatic impact that climate shocks could have. We saw them in Australia as well as parts of Africa,” she said.
The IMF now sees growth at 3.3% this year, below its October projections for 3.4% and also cut the 2021 forecast to 3.4% from 3.6%. Elsewhere, a pre-Davos survey by PwC found that CEOs have never been more pessimistic about global growth than they are currently. In every region of the world, CEOs are predicting slower economic growth and confidence in companies’ own revenue growth is at its lowest ebb since 2009.
“Given the lingering uncertainty over trade tensions, geopolitical issues and the lack of agreement on how to deal with climate change, the drop in confidence in economic growth is not surprising — even if the scale of the change in mood is,” said PwC’s Bob Moritz.
“These challenges facing the global economy are not new — however the scale of them and the speed at which some of them are escalating is new. The key issue for leaders gathering in Davos is: how are we going to come together to tackle them,” he said.
Another Davos survey, by Deloitte, found an increasing number of executives are embracing a larger responsibility beyond profit and are beginning to act on environmental sustainability issues.
“With an increasing number of catastrophic, climate-related events affecting populations and geographies, we’re seeing business leaders increasing their focus and attention on climate and environmental sustainability,” said Deloitte Global Board chair Sharon Thorne.