Economic fragmentation to have a dire impact: World Economic Forum

The World Economic Forum’s Chief Economists Outlook report on Monday warned of dire human consequences from the fragmentation of the global economy and said that developing economies face trade-offs between the risks of debt crisis and securing food and fuel.

While inflation expectations are highest in the US, followed by Europe and Latin America, further declines in real wages are predicted in both high- and low-income economies. Further, the report flagged that the world is facing the worst food insecurity in recent history — especially in the Middle East and North Africa, Sub-Saharan Africa and South Asia.

Multinationals are re-aligning supply chains along geopolitical fault lines, risking a new economic iron curtain and further price spirals, it added.

Releasing their outlook at the WEF Annual Meeting 2022 here, the WEF’s Community of Chief Economists said it expected lower economic activity, higher inflation, lower real wages and greater food insecurity globally in 2022, pointing to the devastating human consequences of the fragmentation of the global economy.

Reversing previous expectations for recovery, the majority of respondents in the latest survey expect only a moderate economic outlook in the United States, China, Latin America, South Asia and Pacific, East Asia, sub-Saharan Africa and the Middle East and North Africa in 2022. In Europe, the majority expects the economic outlook to be weak.

The choices of both business and government are expected to lead to greater fragmentation in the global economy and unprecedented shifts in supply chains, creating a perfect storm of volatility and uncertainty. These patterns are expected to create further difficult trade-offs and choices for policy-makers, and — without greater coordination — shocking human costs.

“We are at the cusp of a vicious cycle that could impact societies for years. The pandemic and war in Ukraine have fragmented the global economy and created far-reaching consequences that risk wiping out the gains of the last 30 years,” WEF Managing Director Saadia Zahidi said.

Zelenskiyy for more sanctions on Russia 

 Ukraine President Volodymyr Zelenskiy reinforced his call for embargoes on oil, technology and other trade with Russia, and said there should be no exceptions in sanctions on the country’s banking sector.

“The world is united because of threats, the war, Russian aggression. I don’t want you to lose this unity,” he said in a video address to the World Economic Forum in Davos, adding that Russian authorities are “afraid of this strong fist.”

The WEF’s annual meeting began Monday in the Swiss ski resort after a two-year hiatus due to the pandemic, albeit with fewer big names from Wall Street and politics.