It is the first day of the most important economic forum in the world and economy and financial markets are as every year in the foreground. The session called “Preventing Future Shocks” finished a couple of hours ago in the Sanada room in Davos with Maria Bartiromo, anchor and Global Markets Editor of Fox Business Network, to lead the panel. The financial markets slowdown has been among others the major issue between the guests.
Among them, Paul Singer, Founder, Chief Executive Officer and Co-Chief Investment Officer of the Elliott Management Corporation, Martin Sorrell who is Chief Executive Officer of WPP Plc, Min Zhu, Deputy Managing Director of the International Monetary Fund (IMF) and Kenneth Rogoff, economist and professor of economics at the Harvard University. Carlos Ghosn, Chairman and Chief Executive Officer of Renault-Nissan Alliance couldn’t attend this session even if he was scheduled to do so.
IMF denies market meltdown
The discussion started with a disagreement between the moderator Ms Bartiromo and the representative of IMF, Mr Zhu because the former characterized 2016 as a year of global market meltdown. The Deputy Managing Director’s view is that there is not a meltdown but the market is adjusting due to uncertainty in an era where high volatility is apparent. Min Zhu underlined the fact that there is still global growth of 3.4% even if in the next 5 years potential growth is meant to decrease.
Central banks and financial regulations against global growth
The famous economist Kenneth Rogoff pointed out that the central banks are not helping the economies revive and realise growth. His concern is also that financial regulations are very hard for the Small and Medium Enterprises (SMEs) because they are not helping them to invest. The latter is leading to less competitiveness and less growth. Furthermore, Paul Singer expressed his major concern on liquidity because banks and wealth funds are lowering investment which leads to less growth.
Oil prices are too volatile to be predicted
The slowdown of oil prices is one of the key drivers of the sluggish growth and was addressed by the panel. “Oil prices are so volatile. You just don’t know if the oil price will be 20$ or 100$ if you are looking in the next 2-3 years”; Ken Rogoff underlines from Davos. The problem is that there is no investment in the sector and global growth can change dramatically in the coming years and drag oil prices along.
The new normal is low growth
The powerful man of WPP Plc talked about the way global growth will be in the next years. There are various and serious problems such as China’s sluggish growth, Brexit possibility, migration, oil price changes and US political situation which all together are driving the global economy down and make investors very conservative when planning their budgets for 2016.
The top class panelists mentioned that not only China but also all the emerging markets are too risky, lowering the global economic growth, and that it is most likely to experience a global recession in the coming years.
The latter is meant to raise serious concerns to the political leaders who have to deal with so many issues and be able to find immediate solutions that will boost global economy.
All in all, the outcome of the session that addressed global economic growth and the trends of the financial markets concluded that political uncertainly is one of key risks that drive global growth which is about to slow down in the years to come.
Stay tuned from 20 to 23 January as the Sting will be once more producing top class critical LIVE media coverage from the Congress Centre in Davos, Switzerland.
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