Monday at Davos: Five Things You Need to Know
The global elite are descending on the Swiss ski resort of Davos for the World Economic Forum’s annual meeting, and some good news from the International Monetary Fund has already arrived to meet them. But not everyone is sure the future looks so bright.
Shot in the Arm
Just in time for opening day, the IMF said global growth will accelerate to its fastest pace in seven years as U.S. tax cuts spur investment. The fund raised its forecast for world expansion to 3.9 percent this year and next. That would be the fastest rate since 2011, when the world was bouncing back from the financial crisis. Cuts to the corporate tax rate in America will give the world’s biggest economy a shot in the arm, lifting U.S. growth to 2.7 percent this year, the IMF said Monday. Nevertheless, some Davos delegates are concerned that things look too good to be true. “We are complacent at this moment,” said Robert Shiller, a Nobel laureate from Yale University. Potential risks include China stumbling, a protectionist push, mounting debt and an inflation outbreak that forces central banks to raise interest rates quicker than anticipated.
The first day at Davos is usually marked by a slew of reports, and this year is no different. In addition to the IMF’s news, Oxfam International declared earlier that the world economy created a record number of billionaires last year, further exacerbating global income inequality. The WEF itself published reports that found American women are more likely than their male counterparts to be knocked out of their jobs by automation over the next eight years and that Norway is the most inclusive advanced economy.
Don’t Bet On It
The long-running joke goes: If it’s predicted in Davos, you can bet the opposite will happen. So how did 2017’s forecasts fare? There was perhaps excess optimism that U.S. President Donald Trump would prove a normal president. “What somebody’s saying is not necessarily what they’re going to do,” David Cote, chief executive officer of Honeywell International Inc., said at the time. JPMorgan Chase & Co. CEO Jamie Dimon said companies need not fret over Trump’s Twitter “one-liners.” But delegates were correct in predicting the U.S. president would be on the side of corporations and that the economy would do well in his first year. Billionaire George Soros, however, was wrong to predict a correction in stocks. Attendees may get a chance to discuss this year’s prognostications with Trump in person. Despite predictions that a government shutdown in Washington would prevent him from coming, the administration said Trump may show up anyway.
Guests are getting a true Swiss winter welcome, with snow falling constantly in Davos through Monday morning. Those traveling Sunday afternoon were even forced to take buses because trains couldn’t reach town; the rails were open Monday. The Swiss Institute for Snow and Avalanche Research has imposed its second-highest avalanche warning for the area, meaning “natural and often large avalanches are likely” and can easily be triggered on steep slopes. Still, if all that snow stays put, attendees with some time to kill always have the option of skiing.
Against the Tide
As stars such as Cate Blanchett and Elton John drop in to mingle with politicians and bankers, local Davos retailers generally make a killing renting out stores and shops so they can be transformed into cocktail lounges and event spaces. Esther Heldstab is determined to swim against that tide. A purveyor of tourist mementos on the town’s main street, she is one of the few shopkeepers who won’t hand over her keys to multinationals that turn shoe stores and bakeries into billionaire meet-and-greets. While the likes of Zurich Insurance Group AG, Credit Suisse Group AG and Deutsche Bank AG take over prime space on Promenade, Heldstab and her sister will stay put at Swissalp Fantasy, where the window display features a stuffed Bernese mountain dog.
Follow our full coverage of Davos 2018 here.