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24 April 2024

Davos: a view from the summit

By Frank Kane


With the first day of the World Economic Forum due to open in the Swiss town of Davos on Wednesday, I think it is time to “mark the cards” for readers planning to attend the annual gathering of the world’s most powerful people, especially those travelling from the Gulf. It is no exaggeration to state that this could be the most important Davos in the event’s 37-year history.

The movers and shakers who take time off from the piste to consider the world’s problems will be confronted by a tableau of almost unremitting gloom. Global stock markets are plunging, currencies are in turmoil, the financial system is creaking and the ‘R’ word – recession – is on everbody’s lips. If ever there was a need for a global meeting of minds to help the world avert economic and financial chaos, now is the time.

Attendees from the UAE and other Gulf states will feel somewhat insulated from the general doom and gloom. With energy prices soaring, huge capital sums on deposit and dynamic growth prospects in most regional economies, the UAE is in no immediate danger of fall-out from the US sub-prime crisis. But with the US still the region’s biggest trading partner, as well as a strategic economic ally whose dollar is pegged to local currencies, the state of the American economy is of great importance to GCC members.

So perhaps the most important session at Davos takes place on the first day. Titled “If America sneezes, does the world still catch cold?” the meeting will debate whether US economic ills are still inevitably contagious for the rest of the world.

The answer is almost certain to be “yes”, though the strength of the infection will depend on which part of the world you do business. What could be a mild cough in the Gulf or in China could well be terminal in Mexico or the Philippines, for example. The big question here is how strongly the contagion will affect Europe – if the Eurozone nations and Britain suffer a severe bout of debilitating economic flu, it could just be the tipping point to recession.

The same issue will be addressed in a slightly different way on the second day, with a session on “systemic financial risk” and the measures that should be taken to avoid it. By the time the forum gets round to discussing “the role of central banks” on the final day (Saturday) some of the answers should already be obvious, especially the key issue: have the world’s bankers increased financial risk by keeping interests low to stimulate economic growth? The consensus answer now is a resounding “yes”.

There are several other sessions that should be compulsory for Gulf delegates. On day one there is a discussion titled “Beyond pipeline politics” on the key issues facing central Asian economies, while day two (Thursday) witnesses a debate on perhaps the second most important issue for the region, after the global economic and financial situation: “Myths and realities of sovereign wealth funds”.
There is an interesting session on Friday about how the world’s wealthy countries, like the GCC members, are demanding a greater say in international affairs.

But have no doubt: the key issue at this Davos is the world financial situation, and this should be on delegates’ minds throughout the forum – even when they are listening to day two’s intriguing session on “The science of love”.