After a two-year break due to the COVID-19 pandemic, global leaders gathered at the World Economic Forum in Davos, Switzerland, in late May. The discussions came amid a period of immense uncertainty for business leaders and fund allocators.
Given the substantial knock-on impacts on global food and energy security, as well as the horrific loss of life and livelihoods, Russia’s war on Ukraine featured prominently at the conference.
The war has exacerbated supply chain issues and threatened supplies of staple agricultural products such as wheat and fertilizer, as well as energy commodities. Ukraine’s Minister of Foreign Affairs, Dmytro Kuleba, warned attendees that the world faces a multi-year food crisis – unless its leaders act fast.
In the meantime, as several business leaders noted, the breakdown in supply chains is prompting a rethink of globalization.
José Manuel Barroso, chairman of Goldman Sachs International, said at the conference: “Tensions between the U.S. and China were accelerated by the pandemic, and now this invasion of Ukraine by Russia — all these trends are raising serious concerns about a decoupling world.”
International Monetary Fund (IMF) Managing Director Kristalina Georgieva warned that the world economy faces “the biggest test since the second world war.”
“The global economic outlook has darkened in the month since the IMF downgraded its 2022 growth outlook because of the war in Ukraine, China's slowdown, and global price shocks, particularly for food,” Georgieva said.
The IMF does not expect a global recession to materialize, although the risks are increasing.
“The World Economic Forum meetings in Davos are focusing on the high inflationary environment and Russian-Ukraine war, along with the related energy crisis and food poverty, and the interwoven risks, which add to weakened market sentiment as they exacerbate the risk of recession,” Investec Bank Economist Annabel Bishop said in a note.
As the U.S. Federal Reserve raises rates to combat inflation, many emerging markets will be forced to do the same to protect their currencies and keep imported inflation under control, Bishop said.
In a televised interview with Bloomberg, from Davos, S&P Global Vice Chairman Daniel Yergin said the world faced “a troubled period ahead and you’re going to see social instability as a result of this.”
Yergin noted that there was no meaningful Russian or Chinese representation at the World Economic Forum, and this pointed to a “more fragmented” and “less globalized” world.
Nevertheless, officials from the U.S. and Chinese governments met to discuss a joint approach to addressing the climate crisis.
According to a report by Fortune, Xie Zhenhua, China’s special climate envoy, said China had reduced its reliance on coal for energy, from 74% of the national mix to 56%.
“Our focus is on trying to build a system based on renewable energy and we are trying to move away from fossil fuels,” Xie said.
Canadian economist Mark Carney, a former governor of the Bank of England, also spoke of the urgent need to accelerate the shift to clean energy.
"We need an energy transformation on the scale of the industrial revolution, at the speed of the digital transformation. And therefore, we need a revolution in finance,” Carney said.
Meanwhile, Pfizer made headlines when it committed to providing all its current and future patent-protected medicines on a not-for-profit basis to 45 lower-income countries.