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In today’s edition, we explain how the Russian invasion has had an impact on the World Economic Forum, which has brought together politicians, businessmen and intellectuals in Switzerland since 1971.
The reflection on the global economy is the most obvious issue related to the War in Ukraine, but not the only one at Davos without snow and without vodka, traditionally distributed in the house that hosted parties hosted by the Russians and which was renamed, this year, “House of Russian War Crimes”.
the one sent from Sheet to Switzerland Luciana Coelho responds about how the country absent from the event became his main topic. “The Forum unequivocally assumed the Ukrainian side, excluding the Russians, for years important funders of the entity’s programs”, she reports.
In addition to Volodymyr Zelensky’s speech in the second, how has the theme of war resonated in Davos? Even due to the predominantly European nature of the meeting in Davos this year, with casualties caused by Covid and the change of date among participants from other regions, the subject overshadowed all other debates. The tone is that geopolitical change, with realignment of blocks, is definitive. The fear that global inflation will grow even more with the reverberation of the conflict and that there will be a lack of food for the poor and energy for the rich haunted many of the panels.
Russia was for years one of the main funders of the event, with parties and the traditional Russian House, which promoted business in the country. Does this previous relationship generate any kind of discomfort? The Forum is not embarrassed by its past ties with Moscow, nor is it announcing that it has cut them off and chosen Ukraine’s side. Calls for increased sanctions against the country ruled by Putin and the characterization of Russia as a criminal were two constants.
What changes without Russia, other than the absence of the house in Davos and the free vodka parties? With nothing from Russia and with a more timid participation of the Chinese, its allies, the debate swung to one side, and the Forum lost part of its shine as a place of convergence, in whose corridors palpable solutions are debated and even found. In fact, the Ukrainian delegation this year is large.
What did the report released at the World Economic Forum highlight about the effects of the war on the economy? The report by economists linked to Davos puts the global economy on the brink of recession, although there are dissenting voices, such as that of the IMF’s chief economist, Gita Gopinath, who sees a risk of lower systemic potential. There are three key points, according to participants I’ve heard in interviews and on panels: (1) Supply chains, including food, will take much longer than previously thought to re-establish; (2) Energy will become more expensive as Russia is crucial in the export of oil and gas; (3) Considering the two previous items, inflation will continue to rise, which should lead central banks to raise interest rates, putting a brake on the post-pandemic recovery.
What does “rolling back globalization”, a picture painted by economists linked to the Forum? There are widespread fears that war and supply chain jolts will lead countries to prefer to trade only with neighbors or allies, or even encourage local production over imports. This would interrupt, or even partially set back, the last three decades of globalization and market integration. Not everyone agrees that this amounts to fragmentation, of course, but the reorganization of these axes does seem to be underway.
Do not get lost
The newsletter editor LeafMarketArtur Búrigo, lists and explains the main economic impacts of the three-month conflict.
Inflation: at a time when the world was still trying to stop the rise in prices generated during the pandemic, the outbreak of war caused a shortage of two essential items: energy and food.
- Russia was one of the main suppliers of oil and natural gas to Europe. With sanctions imposed by Western countries, the supply of these two items has decreased and prices have skyrocketed worldwide.
- The two countries in the conflict played an important role in the global supply of grains, especially wheat and corn, two items that continue to have prices above the historical average. Soybean oil and fertilizers were also more expensive.
Fees: central bank’s tool to curb inflation, this bitter medicine should not only make credit more expensive and reduce liquidity in the markets, but also put a brake on global economic growth.
Energy transition: the crisis provoked by the war swayed with the discourse of priority to renewable sources, worrying the International Energy Agency. The objective became to avoid shortages in the short term, which made the much-demonized coal return to the game.
Business flight: the retaliation was not only between Western countries and large multinationals also stopped or suspended the sale of their products in Russia with the escalation of the conflict. These include McDonald’s, Ferrari and Apple; see the complete list here.
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