July 06
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Multiple threats to the global economy have surpassed the fears of the world's wealthy at the annual Davos Forum, with some noting the risk of a global recession, Reuters reports.

Political and business leaders gathered for the World Economic Forum (WEF) meet amid the highest inflation in a generation in major economies including the US, UK and Europe.

These price hikes shattered consumer confidence and shocked global financial markets, forcing central banks, including the US Federal Reserve, to raise interest rates.

Meanwhile, the aftermath of the war in Ukraine and the unclear end of the COVID-19 lockdown are exacerbating the gloom in the oil and food markets.

"We have at least four crises, which are interwoven. We have high inflation, we have an energy crisis, we have food poverty, and we have a climate crisis," German Vice Chancellor Robert Habeck said.

"And we can't solve the problems if we concentrate on only one of the crises," he added.

"But if none of the problems are solved, I'm really afraid we're running into a global recession with tremendous effect on global stability," Habeck said during a WEF panel discussion.

The International Monetary Fund (IMF) last month cut its global growth forecast for the second time this year, citing the war in Ukraine and calling inflation a "clear and present danger" for many countries.

IMF Managing Director Kristalina Georgieva, speaking in Davos, said that the war, tightening financial conditions and price hikes - in particular for food - have clearly "dimmed" the outlook for the next month, although she does not yet expect a recession.

European Central Bank (ECB) President Christine Lagarde has warned that growth and inflation are heading in opposite directions as rising price pressures dampen economic activity and undermine household purchasing power.

"The Russia-Ukraine war may well prove to be a tipping point for hyper-globalisation," she said in a blog post yesterday.

"That could lead to supply chains becoming less efficient for a while and, during the transition, create more persistent cost pressures for the economy," Lagarde added.

While the economic burden of the Ukrainian crisis is felt most acutely in Europe, the US economy is experiencing the most price pressure.

The consumer price index rose to almost a 40-year high of 8.5% in March. Earlier this month, the Fed reacted with the biggest rate hike in 22 years, and Chairman Jerome Powell announced a similar increase of half a percentage point in at least the next two meetings.

Key emerging markets, including China, are still expected to grow this year, albeit at a slower pace than previously thought.

Marcos Troyjo, president of the New Development Bank set up by Brazil, Russia, India, China and South Africa, said his bank still expects "robust growth" this year in China, India and Brazil.

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