Eyes in Davos focused on global risks

Economic slowdown

On Monday, just a day before the formal start of the WEF, Christine Lagarde, managing director of the International Monetary Fund, will present an update on the World Economic Outlook-a survey conducted and published by the Fund-in Davos. She is likely to renew the IMF's call on countries to foster cooperation to tackle challenges that extend beyond their borders, curb excess imbalances, strength-en inclusive growth, build resilience and improve convergence prospects for low-income developing countries.

In its World Economic Outlook report in October, the IMF cut its global growth forecast for last year by 0.2 percentage points to 3.7 percent partly due to trade tensions between the US and its trading partners.

The IMF warned that escalating trade tensions and the potential shift away from a multilateral, rules-based trading system are key threats to the global outlook. It said intensified trade tensions and rising policy uncertainty could dent business and financial market sentiment, trigger market volatility and slow investment and trade.

The IMF has long warned that higher trade barriers would disrupt global supply chains and slow the spread of new technologies, ultimately lowering global productivity and prosperity. More restrictions on imports would also make tradable consumer goods less affordable, harming low-income households disproportionately.

The comments have been widely interpreted as pointing to the Trump administration's unilateral and protectionist trade policies, which have inflicted costs on the US economy and others that are now deeply integrated in global supply chains.

Theodore Pelagidis, a professor of economic analysis at the University of Piraeus in Greece, said, "I expect that Davos 2019 will focus on the coming economic slowdown, indeed in an unstable political context of increased social polarization driven by nationalistic populism both in Europe and the US."

He attributed the rise of populism to the breakup of the middle class in Western countries. "As an economic slowdown is in front of us, political polarization is expected to become even more radical and aggressive," he said.

Pelagidis, who is also a nonresident senior fellow of the Brookings Institution in Washington, believes the WEF may contribute to a better understanding of what lies ahead. "And by trying to define uncharted waters, it could lead to the realization of the high political and economic risks that the global economy is going to face in the next couple of years," he said.

Peter Bottelier, a visiting scholar at Johns Hopkins University School of Advanced International Studies in Washington, said the annual WEF meeting should definitely focus on the merits of multilateral approaches to solving and addressing global challenges.

"I hope that the meeting will openly and honestly discuss President Trump's ill-considered, mercantilistic, retrogressive, illegal and dangerous trade policies, especially vis-a-vis China," said Bottelier, a former World Bank official whose roles included being head of the bank's resident mission in China.

China and the US have engaged in a tit-for-tat tariff war in recent months, since the Trump administration fired the first shots at China and other major trade partners last year.

But many observers have seen signs for cautious optimism in recent weeks after renewed bilateral consultations between Beijing and Washington. Trump tweeted on Jan 8, "Talks with China are going very well".

Vice-Premier Liu He will visit Washington on Jan 30 and 31 for further consultations on trade and economic issues, the Ministry of Commerce said on Thursday.