DAVOS, Switzerland (Reuters) -Multiple threats to the global economy topped the worries of the world\u2019s well-heeled at the annual Davos think-fest on Monday, with some flagging the risk of a worldwide recession.<\/p>\n
Political and business leaders gathering for the World Economic Forum (WEF) meet against a backdrop of inflation at its highest level in a generation in major economies including the United States, Britain and Europe.<\/p>\n
These price rises have undermined consumer confidence and shaken the world\u2019s financial markets, prompting central banks including the U.S. Federal Reserve to raise interest rates.<\/p>\n
Meanwhile, the repercussions on oil and food markets of Russia\u2019s invasion of Ukraine in February – which Moscow describes as a \u201cspecial military operation\u201d – and COVID-19 lockdowns in China with no clear end have compounded the gloom.<\/p>\n
\u201cWe have at least four crises, which are interwoven. We have high inflation … we have an energy crisis… we have food poverty, and we have a climate crisis. And we can\u2019t solve the problems if we concentrate on only one of the crises,\u201d German Vice Chancellor Robert Habeck said.<\/p>\n
\u201cBut if none of the problems are solved, I\u2019m really afraid we\u2019re running into a global recession with tremendous effect .. on global stability,\u201d Habeck said during a WEF panel discussion.<\/p>\n
The International Monetary Fund (IMF) last month cut its global growth outlook for the second time this year, citing the war in Ukraine and singling out inflation as a \u201cclear and present danger\u201d for many countries.<\/p>\n
IMF Managing Director Kristalina Georgieva, speaking in Daos on Monday, said the war, tighter financial conditions and price shocks – for food in particular – have clearly \u201cdarkened\u201d the outlook in the month since, though she is not yet expecting a recession.<\/p>\n
Asked at a panel whether she expected a recession, Georgieva said: \u201cNo, not at this point. It doesn\u2019t mean it is out of the question.\u201d<\/p> European Central Bank (ECB) President Christine Lagarde, due to speak in Davos on Tuesday, has warned that growth and inflation are on opposing paths, as mounting price pressures curb economic activity and devastate household purchasing power.<\/p>\n \u201cThe Russia-Ukraine war may well prove to be a tipping point for hyper-globalisation,\u201d she said in a blog post on Monday.<\/p>\n \u201cThat could lead to supply chains becoming less efficient for a while and, during the transition, create more persistent cost pressures for the economy,\u201d Lagarde added.<\/p>\n Still, she essentially promised rate hikes in both July and September to put a brake on inflation, even if rising borrowing costs are bound to weigh on growth.<\/p>\n \u201cWe knew, all knew from Day One that this war was bad economic news. Less growth and more inflation,\u201d French policymaker Francois Villeroy de Galhau said. \u201cThis is the price we accepted together to pay to protect our values … It was worth paying this price.\u201d<\/p>\n \u201cI would play down the idea of a short-term trade off between inflation and growth,\u201d he said. \u201cIn the short run, our priority is clearly … fighting inflation.\u201d<\/p>\n While the economic drag from the Ukraine crisis is being most keenly felt in Europe, it is the U.S. economy that is experiencing the greatest price pressures.<\/p>\n The Consumer Price Index shot from near zero two years ago to a 40-year high of 8.5% in March. The Fed responded earlier this month with its largest rate hike in 22 years, and Chair Jerome Powell has signalled increases of a similar magnitude – half a percentage point – at its next two meetings at least.<\/p>\n The higher rates and expectations for more, though, have yet to weaken consumer spending and a red-hot U.S. job market.<\/p>\n \u201cWe\u2019re not seeing it materialize in our business yet,\u201d Marriott International Inc Chief Executive Anthony Capuano said of the threat of recession, adding: \u201cThere continues to be pent-up demand.\u201d<\/p>\n Key emerging markets, including China, are still expected to see growth this year, even if at a slower pace than previously estimated.<\/p>\n Marcos Troyjo, president of the New Development Bank set up by Brazil, Russia, India, China and South Africa, said his bank still expects \u201crobust growth\u201d this year in China, India and Brazil.<\/p>\nTIPPING POINT<\/h2>\n