A week before this week’s World Economic Forum meeting in Davos, Switzerland, gloom gripped the world’s leading economists and institutions. The theme, “Cooperation in a Fragmented World”, felt like a grim plea. United Nations Secretary-General Antonio Guterres said the world was in a “sorry state” because of a range of interlinked challenges. These include inequality, inflation, recession, Russia’s invasion of Ukraine, an energy price crisis, the Covid-19 pandemic, supply chain disruptions, the climate crisis and US-China relations. These were “piling up like cars in a chain-reaction crash”, Guterres said, noting that the widest levels of geopolitical division and mistrust in generations are undermining efforts to tackle global problems. At the start of the year, the International Monetary Fund (IMF) predicted a tougher 2023, with managing director Kristalina Georgieva saying the cost of trade fragmentation could strip between 0.2 per cent and 7 per cent of global output. A World Economic Forum survey of economists revealed that two-thirds predict recession for the year ahead . But by Tuesday this week, IMF deputy managing director Gita Gopinath was reflecting a resurgence of optimism. While not making light of challenges in the year ahead, she said the IMF expects improvement in the second half of 2023. Daniel Pinto, head of JPMorgan’s investment bank, was more upbeat: “Considering all of the things that have happened, the world is a lot better than you would have expected.” Why the shift? Apart from the optimistic narrative that typically comes from the global corporate elite that gathers every winter in Davos, help came from hints that US inflation was abating , oil and gas prices have fallen and recession might not be as severe as feared. A message from Davos on the global outlook. pic.twitter.com/a4AteclZ3d — Gita Gopinath (@GitaGopinath) January 17, 2023 Relief was specifically seen as coming from the world’s three largest economies. There is a green investment boom underwritten by US President Biden’s Inflation Reduction Act ; hopes that a mild European winter could mitigate the impact of the Russia-induced energy crisis; and China’s economic tsar Liu He telling the Davos gathering that the country’s recovery from three years of pandemic isolation will be faster than previously expected . Liu’s upbeat message seemed particularly important in lifting the gloom. “If we work hard enough, we are confident that growth will most likely return to its normal trend, and the Chinese economy will see a significant improvement in 2023,” he said. Coming just a day after China confirmed the second-worst gross domestic product performance since 1976, the comfort blanket was warmly welcomed. Perhaps even more reassuring, Liu reaffirmed China’s commitment to market-driven growth, saying that a return to a planned economy was “by no means possible” while adding “China’s national reality dictates that opening up to the world is a must, not an expediency.” Whether the international audience in Davos has any deep trust in Liu’s assurances is moot. US corporate bosses, under pressure from the Biden administration to diversify their businesses away from China and “friendshore” supply chains as comprehensively as possible, will take all Chinese assurances with a pinch of salt for some time to come. The best one can take away from Davos is that Liu is a well trusted and authoritative voice in President Xi Jinping’s team, even though he is expected to retire in just two months. His efforts to strengthen direct international communication through different channels, including an invitation for US Treasury Secretary Janet Yellen to visit Beijing this year , have bolstered a view that US-China relations are unlikely to deteriorate further and might even improve. Early evidence of any improvement in trust might come within a month, with US Secretary of State Antony Blinken visiting Beijing in February . Speaking of trust, Davos offered a forum for the communications group Edelman to release the 23rd iteration of its Global Trust Barometer. It shared more in common with Guterres’ “sorry state” assessment of international relations than with the rose-tinted mood among the Davos elite. The report found business leaders were the only generally trusted institution worldwide, far more trusted than governments, NGOs or the media. Not one developed nation had more than 36 per cent of its people confident their family would be better off in five years. This pessimism has damaged trust in all institutions except business, according to the report. “The increased perception of business as ethical brings with it higher than ever expectations of CEOs to be a leading voice on societal issues,” CEO Richard Edelman said, adding, “But business must tread carefully, more than half of our respondents do not believe business can avoid being politicised when it addresses contentious societal issues.” Clearly, the Edelman report was completed before the recent revelations about Exxon’s detailed knowledge decades ago of the harmful impact on global warming of the oil and gas industry and its carbon dioxide emissions. As we move forward into 2023, whether there was more truth in the pre-Davos gloom than in the upbeat narrative that emerged later is moot. We might all be hoping for the best, but I fear we face more difficulties in the year ahead. As Martin Wolf wrote in the Financial Times, “The global financial crisis, Covid, resurgent nationalism, deteriorating relations between the US and China and war in Ukraine have transformed the global business environment for the worse.” David Dodwell is CEO of the trade policy and international relations consultancy Strategic Access, focused on developments and challenges facing the Asia-Pacific over the past four decades.