By Nick
Hedley
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.