Biden, Georgieva pushes against the fear of recession in the darkness of Davos

US President Joe Biden and International Monetary Fund chief Kristalina Georgieva both returned to the threat of an impending economic downturn after a week of financial-market concerns about stagnation.

“For some countries, the risk of a recession has increased, but we do not expect a global recession,” Georgieva told Francine Lacova on Bloomberg Television at the World Economic Forum in Davos, Switzerland. When asked by a reporter, Biden answered “no” to whether such a result was inevitable for the United States.

After a week of turmoil, the eloquent remarks of two guardians of the global economy on Monday were overshadowed by the overwhelming investor sentiment that prompted the Group of Seven finance ministers to sound alarm and saw the S&P 500 avoid a bear-market close on Friday. .

“Our GDP will grow faster than China’s for the first time in 40 years,” Biden said after meeting with Japanese Prime Minister Fumio Kishida in Tokyo. “Does that mean we don’t have a problem?” We do. We have problems with the rest of the world. But because of our internal growth and strength, we have been less productive than the rest of the world. ”

Georgieva acknowledged that the IMF was projecting weaker growth for the world than expected last year and that there was a risk of further downgrades. Nevertheless, he observed, 3.6% of the fund’s forecast for 2022 matched the average of the previous decade.

Many participants in the Swiss mountain resort of Davos are less optimistic. Despite tasting the forum’s first in-person gathering since the epidemic hit, they see a unique set of new difficulties that threaten to crush the economy and hurt living standards.

Fatih Biral, executive director of the International Energy Agency, told Bloomberg Television that there was a risk of a global recession if oil producers did not help keep prices in check.

David Nabarro, WHO’s Special Envoy for COVID-19, said at the World Health Organization’s inaugural event: Edelman Trust Barometer in Davos.

Germany’s economy minister, Robert Habeck, said the war in Ukraine reflected how Russian President Vladimir Putin was using hunger as a weapon, while David Zeb, CEO of Algebras Investments, described Davos’ mood as “sad” because of the conflict. .

“Three hours later, people are dying and shooting at each other,” he told Bloomberg Television. “And so I think that’s why it’s different.”

Best of all predicts that U.S. stocks may fall further as earnings expectations are still very high.

Another optimistic voice in Davos was Jason Farman, a professor at Harvard University and former White House economic adviser, who told Bloomberg TV that he saw only a 20% chance of a U.S. recession next year.

“Consumers are still spending a lot, people are closing the sidelines for jobs, more inventory will be rebuilt,” he said. “When you look after this year, I get even more worried. That’s when the Fed’s rate hikes begin. ”

Far from the mountains, data released on Monday also provides the basis for global growth expectations, with a surprisingly exuberant release from Germany’s IFO Institute in Munich showing high business confidence and expectations among companies in Europe’s largest economy. “There are currently no significant signs of a recession,” President Clemens Fouest said in a statement.

It was in Germany that the G-7 finance ministers met last week to discuss the state of the world. Despite concerns about stagnation, they have also demonstrated their general determination to sustain global growth with a commitment to “a strong, sustainable, balanced and inclusive global recovery.”

This is the feeling Georgieva felt when she insisted that the country and policy makers would not lose everything if they worked together on the epidemic experience.

“International cooperation is good for everyone,” he said. “We could have been in a Great Depression – but we are not.”

© 2022 Bloomberg

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