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Davos Summit: Leaders Optimistic About Global Economy Despite Mixed Signals

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All leaders and top government officials are racing to make optimistic statements about the global economy.

The DAVOS summit also gave them the opportunity to voice their forecast, expectations, concerns and hopes.

These days, we see both good and bad numbers and news at the same time.

Here are the headlines:

IMF Deputy Director Gopinath mentioned revising their economic growth forecast upward. She also expressed their concern about the geoeconomic fragmentation. Despite the positive economic data from the EU and the USA which gives hope that the world economy can avoid a recession in 2023, the common opinion is that 2023 is going to be a difficult year.

JPMorgan Director Daniel Pinto also pointed out that the global economy has remained resilient despite the war, pandemics, and one of the largest contractions in history.

While the reopening of China is a good sign for the global economy, current data shows that things are still going badly in China. December manufacturing industry PMI data continued its sharp decline and reached 47 level. In addition, according to the data, China’s exports fell 9.9% in December from a year earlier.

The Baltic Dry Index (BDI) has fallen rapidly since December 21. BDI, which was 1,735 points on December 21, has decreased to 874 points yesterday by experiencing a consecutive decrease in the last days. Experts are worried that the situation will worsen.

Until the end of the Chinese New Year holiday in February, domestic demand will likely remain weak. Starting from March, Covid-19 will determine the growth of both the Chinese economy and the global economy.

With an ongoing war in Ukraine on one side and Taiwan tensions escalating in Asia, on the other, China, the EU and the US must have clearly understood that fueling aggression will benefit no one. In that vein, we’re hearing concerns from Davos about economic fragmentation. 

As for the US-China tension, they are also looking for a communication ground. In response to China’s dominance of Africa, Yellen heads to the continent on a multi-country trip. Prior to that, he met with Chinese Vice Premier Liu He in Zurich on Wednesday. Both sides are signaling their intention to rebuild the US-China Relationship. But it’s too early to talk about a return to normal pre-Trump times.

German 2022 inflation rose to its highest level since 1990, with an average increase in consumer prices of 7.9%, compared to 3.1% in 2021. The German Chancellor Olaf Scholz has assured that Germany, being the Eurozone’s largest economy, will not experience a recession. Additionally, a survey of investor expectations conducted by the German think tank ZEW has also turned positive for the first time since Russia’s invasion of Ukraine.

In his speech at the Davos summit, Scholz also expressed his concerns about the economic fragmentation and stated that more free trade agreements should be made.

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