Confidence and caution at World Economic Forum opening day

Some 3,000 thought leaders descended on the Swiss Alpine town against a background of political shocks and uncertainty in 2016, with more potentially on the cards this year.

DAVOS // The mood among business leaders on the opening day of the World Economic Forum annual meeting in Davos was one of confidence in the global macroeconomic situation, but worry that geopolitical and other risks might derail growth.

Some 3,000 thought leaders descended on the Swiss Alpine town for the 47th yearly gathering, extended this year to five days, against a background of political shocks and uncertainty in 2016, with more potentially on the cards this year. PwC, the accounting and consulting firm that traditionally kicks off the meeting with the publication of its annual survey of chief executives, reported that an increasing number of the 1,379 bosses polled were very confident of their own company’s prospects (38 per cent against 35 per cent last year) and of a recovery in economic growth (29 per cent versus 27 per cent), a big majority were concerned about uncertainty in global business.

Some 82 per cent said they were worried about economic volatility, mainly because of geopolitical factors, while 80 per cent were worried about the possibility of over-regulation by governments. Some 77 per cent were worried about a possible skills shortage.

“Despite a tumultuous 2016, CEO confidence is moving back up – albeit slowly and still a long way from the levels we saw back in 2007. But there are signs of optimism right across the globe, including in the UK and US, where, despite predictions of a Trump slump and a Brexit exit, CEOs’ confidence in their company’s growth are up from 2016,” said Bob Moritz, PwC global chairman.

“Public discontent has the potential to erode trust which is needed for long term sustainable performance.

“Understanding the root cause of the potential discontent or perception is a critical first step towards communicating the benefits of business for society. There’s a lot at stake if we do not achieve inclusive global growth,” he added.

Mr Moritz said that Middle East CEOs were marginally less worried about the region than they were last year, in comparison to more urgent global issues.

Concerns about the effects of political developments on the global economy were also expressed by the two top analysts at Citibank. At a special briefing, Tina Fordham and Willem Buiter, Citi’s chief global political analyst and chief economist, spelt out their fears about the looming presidency of Donald Trump and ongoing destabilisation in the European Union.

“The good thing about Donald Trump is that we might get two years of some economic growth in America, but then the pain could start. He is talking of fiscal stimulus at a time when that isn’t needed, and the danger is that is could lead to higher inflation and deficits,” Mr Buiter said.

Ms Fordham said that global risks would increase under the new presidency, and she saw a particular danger to the long-term relationship with China, which she called the “backbone of the global political system”.

She said her top political risk of 2017 was Mr Trump’s tendency to make unpredictable statements on social media. “He should retire his Twitter account. It just creates random noise that in the circumstances we could do without.”

But she added that Arabian Gulf leaders might feel more comfortable with the new president, and that the Saudi Arabian 2030 Vision plan was a positive development for the region. “They [Saudis] are going for it, but the questions is how quickly they can make it happen.”

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