A sign of the World Economic Forum is seen at the Congress Centre during the WEF's annual meeting in Davos on May 23, 2022. FABRICE COFFRINI AFP DAVOS, Switzerland - Multiple threats to the global economy topped the worries of the world's well-heeled at the annual Davos think-fest on Monday, with some flagging the risk of a global recession.
Political and business leaders gather for the World Economic Forum WEF against the backdrop of inflation at its highest level in a generation in major economies including the United States, Britain and Europe.
These price rises have undermined consumer confidence and hurt the world's financial markets, prompting central banks like the US Federal ReserveFederal Reserve to raise interest rates.
There are at least four crises that are interwoven. We have a food poverty, and we have a climate crisis. "We can't solve the problems if we focus on only one of the crises," Robert Habeck, German vice Chancellor, said.
"If none of the problems are solved, I'm really afraid we're running into a global recession with a tremendous impact on global stability," Habeck said during a WEF panel discussion.
The International Monetary Fund IMF last month cut its global growth outlook for the second time this year, citing the conflict in Ukraine and singling out inflation as a clear and present danger for many countries.
The European Central Bank ECB President Christine Lagarde is due to speak to Davos on Tuesday, warning that growth and inflation are on opposing paths as rising price pressures affect economic activity and devastate household purchasing power.
She said in a blog post on Monday that Russia-Ukraine conflict may be a tipping point for hyper-globalization.
Lagarde said that it could lead to supply chains becoming less efficient for a while and create more cost pressures for the economy during the transition.
She 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.
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The economic drag from the Ukraine crisis is most prominent in Europe, but it is the US economy that is experiencing the greatest price pressures.
The Consumer Price Index shot from near zero two years ago to a 40 year high of 8.5 percent in March. The Fed responded to its largest rate hike in 22 years earlier this month, and Chair Jerome Powell signaled increases of a similar magnitude - half a percentage point at its next two meetings at least.
Consumer spending and the US job market have been weakened because of the higher rates and expectations for more, as well as higher expectations for more.
There continues to be pent-up demand, according to Anthony Capuano, Chief Executive of Marriott International Inc., who said we're not seeing it materialize in our business yet. Key emerging markets are expected to see growth this year, even if at a slower pace than previously estimated.