2024 will be a complicated and worse year than expected. The message coming from the World Economic Forum in Davos, which closes today, is darker than that of a year ago. Not only are there two more wars – Israel against Hamas, Iran against Pakistan – but tensions in the Red Sea risk derailing some international trade. According to Christine Lagarde, president of the European Central Bank, we are moving “from normalization to non-normality”. A scenario as uncertain as it is dangerous. The good news is that inflation is falling, she says, but at the same time economic momentum is waning, as is global consumption and trade.
In the last panel of the 54th edition of the WEF, the most anticipated were Lagarde and the German Finance Minister, Christian Lindner. Both outlined a difficult picture to read, as emerged throughout the Forum. There are many transitions that are taking place. The technological one, with generative artificial intelligence which was the protagonist in Davos. The ecological one, which continues to be the paradigm for Western governments. And the energy one, with Europe becoming independent from Russia in every way. The problem is that you have to be patient. Lagarde says it openly, according to which normalization has begun, but we must talk about “non-normality”. From consumption to excessive savings, from international trade to inflation, Lagarde’s “non-normality” translates into a framework in which there have been both improvements – as in the case of the fight against price increases – and difficulties. Of course, as Lindner said, the global economy has “demonstrated remarkable resilience” but it is not possible to let our guard down.
What worries the participants of the last panel most is the slowdown in international trade. It is not just the question of the Red Sea, and therefore of the Suez Canal, as explained by Ngozi Okonjo-Iweala, director general of the World Trade Organization (WTO). Trade wars “are increasing and we may see a new slowdown”, capable of having an impact on the global economy. The reference to the technological conflict between China and the United States is clear, as is the conflict between China and Europe over electric vehicles. However, some areas of positivity remain: “I am thinking of electronic commerce, as well as “green” commerce, which can be an element of resilience for the entire world“. Lagarde also finds a positive aspect. Globalization, she explains, “has a great positive impact on bringing people out of poverty. When we talk about decoupling or derisking from China, there will be new value chains.” But this phenomenon has a consequence, namely “a higher price in the long term, which should not be underestimated”. Lagarde has one certainty, however: “The current development model remains the one that best guarantees global prosperity.”
What is certain is that building a protection network against adverse winds is possible. “The best defense is attack. We need a strong single market, and we should see some results from the report of former Italian Prime Minister Enrico Letta,” says Lagarde, replying to Lindner that he spoke of a Germany seeking greater competitiveness. All this, according to Lagarde, without forgetting the green transition, which continues to be one of the keystones for the “new Europe”. As long as there are not too many subsidies, explained Minister Lindner.
In the background, as recalled by the financier David Rubenstein, the US elections. “They will be a significant watershed, because if Donald Trump is elected many things will change. It won’t be an easy year, especially in terms of relations between Washington and Beijing”, explains Rubenstein. But there is also a reference to relations on both sides of the Atlantic. A return of Trump to the White House could distance the US from NATO, just as it could create trade tensions with Brussels. In that case, Europe would pay the highest price.