Borge Brende, president of the World Economic Forum, offered a grim view of the global economy, saying the world faces a decade of low growth if the right economic measures are not implemented.
Speaking on Sunday at the WEF's 'Special Meeting on Global Cooperation, Growth and Energy for Development' in Saudi Arabia, he warned that global debt ratios are close to levels not seen since the 1820s and that there is a ' stagflation' risk exists for the advanced economies.
'Global growth [estimate] this year it is around 3.2 [%]. It's not bad, but it's not what we were used to – trend growth has been 4% for decades,” he told DailyExpertNews's Dan Murphy, adding that there was a risk of a 1970s-style slowdown in some major economies . .
“We can't have a trade war, we still have to trade with each other,” he explained when asked how to avoid a period of low growth.
'Trade will change and global value chains – there will be more nearshoring and friendshoring – but we cannot lose the baby with the bathwater… Then we need to tackle the global debt situation. We haven't done that yet. given this type of debt since the Napoleonic Wars, we are approaching 100% of global GDP in debt,” he said.
He said governments need to consider how to reduce those debts and take the right fiscal measures without ending up in a situation where it heralds a recession. He also pointed to persistent inflationary pressures and that generative artificial intelligence could be an opportunity for developing countries.
Borge Brende, President of the World Economic Forum (WEF).
Bloomberg | Bloomberg | Getty Images
His warning echoes a recent report from the International Monetary Fund, which noted that global public debt rose to 93% of GDP last year, still 9 percentage points higher than pre-pandemic levels. The IMF predicted that global public debt could reach nearly 100% of GDP by the end of this decade.
The Fund has also highlighted high debt levels in China and the United States, saying that accommodative fiscal policies in the latter countries are putting pressure on interest rates and dollars which then drives up financing costs around the world, exacerbating pre-existing vulnerabilities.
Earlier this month, the International Monetary Fund slightly raised its global growth forecast, saying the global economy had proven “surprisingly resilient” despite inflationary pressures and shifts in monetary policy. It now expects global growth of 3.2% in 2024, a modest increase of 0.1 percentage point from its previous January forecast.
WEF's Brende said on Sunday that the biggest risk to the global economy now is “the geopolitical recession we are facing”, highlighting recent tensions between Iran and Israel.
“There is so much unpredictability and it can easily get out of hand. If Israel and Iran had escalated that conflict, we could have seen an oil price of $150 overnight. And that would of course be very damaging to the global economy,” he said. said.