The World Economic Forum annual meeting is over.
Delegates are scarpering to make their way home, or to a swanky lunch up the mountain.
And just like that, the circus leaves town. @wef 2023 meeting in #Davos is a wrap.
— Alex Cadier (@alexcadier) January 20, 2023
I’m off to eat my body weight in fondue. @featurestory pic.twitter.com/1MGtKAlPM6
But away from here, protests calling for the rich to be taxed properly are taking place.
For anyone who wants to mark their support for taxing the ultra rich, today is #BlackBandFriday. Here's @jenny_ricks of @FightInequality to tell you all about it https://t.co/sjwOAnEt84
— Patriotic Millionaires UK (@PatMillsUK) January 20, 2023
Jenny Ricks, Global Convenor of Fight Inequality Alliance said:
“As the rich and powerful leave the snowy peaks of Davos behind, the daily struggle for millions to keep themselves from going under continues.
It’s time for an intervention from the people. Protestors in countries from the Philippines to Nepal, from South Africa to Kenya and beyond are not fooled into thinking change will come from the 1%. We know it will be won on the streets, by us forcing our governments to tax the rich.”
Here’s our latest story on Davos today:
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Climate activist protest in Davos
A group of climate activists including Greta Thunberg are holding a protest in Davos, calling for climate justice and an end to new fossil fuel projects.
Outside the World Economic Forum’s annual meeting, the protesters chanted “What do we want? Climate justice. When do we want it? Now” and “Fossil fuels have got to go”.
There’s around 30 activists, Reuters estimates.
Thunberg held up a sign saying “Keep it in the ground”.
We reported yesterday that Thunberg and other activists have drawn up a “cease and desist” notice to oil and gas executives, urging them to immediately halt new oil, gas or coal extraction sites.
Climate strike week 231, in Davos outside the World Economic Forum where those most responsible for the climate crisis meet. We’ve written a letter to fossil fuel CEO’s demanding no new fossil fuels. You can sign it too: https://t.co/vsr048rHuo#FridaysForFuture #ClimateStrike pic.twitter.com/nP02hpiZh3
— Greta Thunberg (@GretaThunberg) January 20, 2023
Lagarde: Must avoid subsidy wars over green tech
Christine Lagarde tells WEF that she hopes the subsidy race underway in green technology “is not going to be a race to the bottom”.
The ECB president cites the long-running row between the US and Europe over Airbus and Boeing, which led to 20 years of subsidy wars before a ceasefire was agreed in 2021.
If we get a repeat, Lagarde warns, “the WTO will be in business”.
The World Trade Organisation (WTO) resolves trade disputes.
Last month, the head of the European Parliament’s trade committee reportedly said the EU should file a complaint with the WTO over president Biden’s Inflation Reduction Act (IRA), the new US green energy subsidy package.
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Asked about his concerns for the future, Larry Summers cites the risk of another Covid variant, or a Covid-like crisis in future.
Summers also warns that there is “a lot of debt in a lot of places”.
If interest rates rise more than is anticipated, there may be a need for financial fire-fighting domestically, and globally.
Looking ahead, Kristalina Georgieva warns that the push to use government spending to step up private investment in green tech may not serve emerging markets well.
If you take these technologies to emerging markets, if that is part of your plan, then we will succeed, she says.
But we are “all cooked”, if we try to clean up the developed markets and forget about the developing world, she adds.
French finance minister Bruno Le Maire tells Davos that Europe has shown more strength and unity over the Ukraine war than Vladimir Putin expected.
Rather than being “divided and weak, we have been united and strong”, Le Maire says.
He says that over the last three years, we have entered a new era of globalisation – from market-driven globalisation to political power-driven globalisation.
The world economy must avoid fragmentation, and trade wars, Le Maire says, which means the engagement of all countries including China.
He says:
China cannot be out. China must be in.”
But that must be on a level playing field, with fair access to markets.
On the US Inflation Reduction Act, Le Maire says it is a good thing that president Biden has decided to accelerate the push for green technology and fight against climate change. Europe must do the same thing (Ursula von der Leyen outlined her thinking on this at Davos on Tuesday).
Le Maire says Europe must speed up its subsidy programme, and focus on specific European sectors it wants to support.
Do we want to buy foreign goods, or put money into investment – into hydrogen, semiconductors, solar panels, renewables, he asks. That would make Europe more independent, rather than reliant on overseas suppliers, in the fight against climate change.
French economy minister @BrunoLeMaire calls for an EU equivalent to the US inflation reduction act.
— Alex Cadier (@alexcadier) January 20, 2023
Including calling for the EU to focus on homegrown industry - sounds like “EU first”
Adding that it has to be done swiftly “two or three years is too long”@wef #Davos pic.twitter.com/NegMcHMuor
Bank of Japan Governor Haruhiko Kuroda tells Davos the central bank will continue its current “extremely accommodative” monetary policy to achieve its 2% inflation target in a stable, sustainable manner.
He tells the panel:
“Our hope is that wages will start to rise, and that could make our 2% inflation target met in a stable and sustainable manner. But we have to wait”
Japanes inflation hit a four-decade high of 4% overnight.
Christine Lagarde also strikes an upbeat tone.
The sitution must be improving if you hear so many leading economists saying the situation is not as bad as feared, the ECB chief tells the panel discussion.
Also, companies are moving from ‘defense mode’ to ‘competition mode’, so something must be getting better than we thought.
2022 was a weird, weird year, Lagarde says, pointing out that the US grew more slowly than China, or Europe.
Lagarde says her monetary policy mantra is to ‘stay the course’ – addressing Larry Summers concerns that central bankers might stop the fight against inflation too soon.
#ECB's Lagarde at #wef23: “Stay the course” is my mantra on monetary policy. pic.twitter.com/BoA1GeBzFs
— Holger Zschaepitz (@Schuldensuehner) January 20, 2023
Professor Larry Summers warns central bankers not to let up too soon in the fight against inflation.
We do not want to have to fight this battle twice, Summers tells today’s panel discussion, saying allowing inflation to get out of control would be dangerous.
Summers says:
If inflation was allowed to surge back, that would put not just price stability and standards of living for low-income people at risk, but also pose substantial risks to cyclical stability.
Q: At what point does the IMF think about upgrading its economic forecasts?
Georgieva points out that the IMF has downgraded its growth forecasts three times in a row, so not doing another downgrade is progress.
But if the IMF does adjust its forecasts higher, she doesn’t expect a ‘dramatic improvement on the 2.7% growth currently expected in 2023.
Georgieva points out that consumer spending could weaken if the jump in interest rates pushed up unemployment.
It is very different to have a cost of living crisis and a job, than a cost of living crisis and no job.
IMF's Georgieva: Economic situation is less bad than we feared
Kristalina Georgieva speaks first on today’s economic outlook panel, and drops a hint that the International Monetary Fund might upgrade its economic forecasts.
Georgieva says that the economic outlook is “less bad than we feared a couple of months ago”.
But, she cautions, “less bad does not yet mean good”.
Georgieva says there are several reasons for optimism.
Firstly, inflation is starting to head down; headline inflation in particular.
Secondly, China’s potential to boost growth has improved. Last year, China’s economy grew more slowly than the global average for the first time in decades.
But with the reopening of China, we now expect its growth to exceed the global average. The IMF expects the world economy to expand by 2.7% this year, Georgieva says, although this may be corrected in a couple of days, compared to China which could grow at 4.4%
Thirdly, the strengths of labour markets have led to consumers keeping spending and supporting economic growth.
But, 2.7% growth is not fabulous – it would be one of the worst performances in years, apart from after the 2008 financial crisis and the pandemic.
Georgieva tells Davos delegates that there are several reasons for caution.
One, we don’t know how inflation will “march downwards”.
Two, what if China’s faster growth means higher oil and gas prices, pushing inflation up?
Third, the Ukraine war is a tremendous risk to confidence, particularly in Europe
So in conclusion, Georgieva says we shouldn’t get carried away:
Be careful not to get on the other side of the spectrum, from being too pessimistic to too optimistic.
Updated
The final major event of this year’s WEF is about to start – on the global economic outlook.
It’s asking if we have reached the end of an era, as global growth slows and the cost of living crisis hits households.
On the panel, in the Congress hall here in Davos:
Kristalina Georgieva; Managing Director, International Monetary Fund
Christine Lagarde; President, European Central Bank
Bruno Le Maire; Minister of Economy, Finance and the Recovery and Industrial and Digital Sovereignty of France, Ministry of Economy, Finance and Industrial and Digital Sovereignty
Lawrence H. Summers; Charles W. Eliot University Professor, Harvard Kennedy School of Government
Kuroda Haruhiko; Governor of the Bank of Japan, Bank of Japan
Updated
Switzerland’s top central banker has said monetary policy was “too expansionary” in previous years.
Thomas Jordan, chairman of the Swiss National Bank, also told Davos that the current surge in consumer prices has not yet been brought under control.
Speaking on a panel here in Davos, he said:
We probably all underestimated inflationary pressure in 2021….
“Probably, with the benefit of hindsight, monetary policy was all over the place a little bit too expansionary.
Switzerland abandoned its negative interest rates last September, after inflation hit the highest level in three decades.
Monetary policy everywhere was too expansionary and further tightening is necessary, according to Swiss National Bank chair 🇨🇭
— Hannah Ward-Glenton (@hannahswg) January 20, 2023
SNB's Thomas Jordan spoke to @CNBCJou in Davos ⛰️https://t.co/XQJ0hNZ8nW
Rebeca Grynspan, who heads the UN”s trade and development body Unctad, says reform of the international system is badly needed so that it can deliver for struggling poor countries.
The International Monetary Fund and the World Bank were both created at the Bretton Woods conference in 1944 and are in need of radical reform, she tells us.
“You have to redesign the system firstly to take account of the different world we live in and secondly in terms of the instruments needed.”
Grynspan said the IMF lacked the ability to intervene speedily and at scale, while the World Bank needed to scale up its lending so that it could leverage private capital into developing countries.
Grynspan says:
“We need to see financial support at scale and at the speed countries need. We also need a serious discussion about debt. We are seeing neither of these things.”
The strength of the dollar and rising interest rates had been life more difficult for developing countries in the past year. Higher interest rates in the developed world had led to capital flows from South to North, Grynspan explained.
“We are not seeing the scale of response countries need to follow the transformational agenda set out in the Paris climate change accord. Climate finance has to be at the centre of the discussion.”
Sanctions against Russia will not win the war for Ukraine, says Mikuláš Bek, European Affairs minister of the Czech Republic.
Speaking on the panel alongside Rogoff, von Himmel and Dombrovskis, Bek says:
The sanctions are and will be circumvented. Ther will be countries not respecting them.
Bek explains that sanctions are a way to buy time – to rebuild Europe’s energy infrastructure, such as more north-south pipelines, and to increase Europe’s defence capabilities by raising the capacity of the defence industry.
Ken Rogoff back up this second point strongly, adding:
If this doesn’t change the perspective in Europe, I’m not sure what will.
Updated
Today’s meeting of defense ministers at the Ramstein Air Base in Germany, to discuss military support for Ukraine is ‘very critical’, Karin von Hippel, director-general of the Royal United Services Institute for Defence and Security Studies.
It’s likely the Russians will launch a spring offensive, and have another round of mobilisation soon, von Hippel says.
We’re anticipating more russian destructionof infrastrcture, killing more civilians, bombing apartment buildings, so the best scenario is that the Ukrainians get the weapons they need very soon, von Hippel says.
Tanks will help push the Russians out of their positions in Ukraine, says Von Hippel, adding
We don’t want Russia to have the time to re-arm and regoup.
The worst case scenario is that military aid comes in '“too peacemeal” a fashion, and it becomes a nasty war of attrition, where most of Ukraine is reduced to rubble over the next year, Von Hippel explains.
If Vladimir Putin is in power at the end of the war, it’s going to be “an incredible challenge” for Western countries, she warns.
Who can shake that man’s hand in the future?
Even if there is a peace agreement, there is blood all over his body for violating so many international laws and international norms.
So while sanctions will continue, we must think how we deal with a pariah state going forward, Von Hippel concludes.
Valdis Dombrovskis, the EU trade commissioner, warns against fatigue setting in over the Ukraine war.
Sanctions are working, Dombrovskis tells Davos, predicting Russia’s downturn will continue.
“If we look, Russia’s economy was in recession last year and will be in even deeper recession this year.”
Dombrovskis points out that Russia’s economy was helped by energy prices being at record highs, ironically partly due to the impact of the Ukraine war.
He says sanctions are having a cumultative effect, with individual, financial, trade and economic restrictions working together.
It’s important to keep pressure on Russia’s energy sector through sanctions, Dombrovskis continues, saying “we were a bit slow and late” with the Russian oil embargo in the European Union and the oil price cap in the G7.
Now discussions are underway on an oil products price cap – hopefully this can be done next month, Dombrovskis says.
It is “very important to stay the course”, he concludes.
Updated
Ken Rogoff: Russia is heading to incredibly poverty due to sanctions
Davos has heard this morning that sanctions on Russia are playing a vital role in the Ukraine war.
Ken Rogoff, Harvard University economics professor, is telling delegates that while the war will be decided by military action, sanctions are having a significant impact on Russia’s economy.
He hopes there will be regime change in Russia, but points out that this is hard to achieve:
Look at Iran, look at North Korea, look at Venezuela, look at Cuba, that’s where Russia’s headed.
A ‘giant Iran’ may be the best decription, Rogoff says, with “incredible poverty compared to what Russians have become accustomed to”.
Rogoff believes Russia’s economy is weaker than the offical statistics, saying he doesn’t believe anything Russia says when it comes to numbers.
Rogoff points to underemployment levels, and fiscal revenues showing manufacturing and other parts of economy are slowing down.
The most important sanctions are the ones that slow Russia’s military machine, Rogof explains. He suggests there should be a further clampdown on the grey market, as consumer devices have chips which can be repurposed for military purposes.
I woud absolutely not draw the conclusion that sanctions are not working. They are second to military intervention, but they’re absolutely important, Rogoff insists.
He also says there are examples where sanctions can achieve regime change, such as in apartheid South Africa.
Rogoff says:
“If you keep up sanctions for a long time, and make them stronger and stronger, they do work”
Updated
Introduction: Economic outlook in the spotlight
Good morning from Davos, where the final day of the World Economic Forum is underway.
Hopes that the world economy might only suffer a mild recession will be tested today, when top central bankers and policymakers give their assessment of the situation.
Kristalina Georgieva, managing director of the IMF, Christine Lagarde, president of the European Central Bank, and Bank of Japan governor Kuroda Haruhiko all appear on a panel on the economic outlook, alongside French finance minister Bruno Le Maire and professor Lawrence Summers.
They will discuss the future of growth, and the policies needed to stabilize the global economy, from 11am Davos time (10am UK).
The chatter here is that the world economy might pick up in the second half of this year.
That’s despite polling suggesting business leaders and economists were notably gloomy, and signs that the engines of global growth are slowing, with more households and businesses facing economic distress.
Davos delegates are also pondering how the UK’s economic outlook might change under a future Labour government, after Keir Starmer and Rachel Reeves attended Davos yesterday.
Where’s Rishi? Neither Sunak or Hunt are at @Davos this year for reasons that aren’t very clear. There’s a gap on stage and Labour is filling it. This is a remarkable photo - Starmer + Reeves chatting with executives from the big global banks - JP Morgan, Citi, Morgan Stanley. pic.twitter.com/rdOLlUYCQa
— Joel Hills (@ITVJoel) January 19, 2023
Starmer condemned Rishi Sunak’s decision not to attend Davos – and some in Davos agree it was a mistake by the PM.
One business figure told us yesterday:
“Rishi was straitjacketed and took the decision not to come last year in a moment when it felt unviable. Things have moved on.
Rishi would have stolen the whole show.
“Starmer and Reeves have set the tone really well. They are here to promote themselves but they have done it on the pretext of promoting the UK, which is filling a vacuum left by Rishi.”
The Labour heavy hitters’ message to Davos was that Britain would be ‘open for business’, as they tried to woo world leaders and chief executives with a reassuring message.
They also rubbed shoulders with the WEF elite at JP Morgan’s party on the Davos promenade last night, where Starmer chatted with Tony Blair and Jamie Dimon.
Russia’s economic outlook and the impact of artificial intelligence are also on the agenda today.
The agenda
9am Davos / 8am GMT: A panel session on AI and White-Collar Jobs
9am Davos / 8am GMT: A panel session on Mapping Russia’s economic Trajectories
10.15am Davos / 9.15am UK: A panel session on Youth Calls to Action
11am Davos / 10am GMT: Global Economic Outlook: Is this the End of an Era?
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