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Inside Out | Davos elite must realise even ‘least-worst’ scenario in Ukraine is still disastrous for the global economy
- Business and political leaders at the World Economic Forum appear to have been buoyed by the possibility of a Ukrainian victory in 2023
- However welcome such an outcome, it wouldn’t reverse the damage already inflicted on Ukraine, Europe and the world, recovery from which could still take years
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Old age and cynicism may go hand in hand, but I still find it difficult to understand the sudden surge of economic optimism that emerged from Davos.
After all, the evidence still overwhelmingly points to 2023 being a severely challenging year, dogged by slow growth and perhaps recession, inflation that will erode consumer power and household incomes, the shocking, costly impact of Russia’s invasion of Ukraine, the pressure to spend trillions to mitigate global warming, and the costs of rebuilding healthcare systems after painful lessons learned during the Covid-19 pandemic.
Call me an old curmudgeon, but I have a feeling that someone, somewhere among the gathered elite in Davos, had mischievously switched on the jaunty old Monty Python song “Always look on the bright side of life”.
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While the IMF is now predicting that the European Union might marginally escape recession, most of the world’s largest and most important economies are juggling their worst budget crises in decades, with tax and other revenues sharply down and spending pressures relentlessly rising.
It seems two factors above all others lifted the Davos mood. First was China’s abandonment of its ruinous zero-Covid strategy, and the declaration by China’s economic tsar Liu He that “China is back”. Yet celebration over such rhetoric is perhaps premature.
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Without doubt, China’s reopening will in due course provide important stimulus to the world economy and damaged supply chains. But this will take time. Meanwhile, the more fundamental trade and technology conflict between the US and China remains wholly unresolved, and seems set to get worse before it gets better.
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