The World Economic Forum WEF Annual Meeting ended late on Saturday with more pessimism that the last year, however some experts call for optimism. The session closed a week-long meeting on the world's most pressing issues and long-term challenges, including inequality, climate change and terrorism. "We have to increase the impact that global growth has on the poorest", said President of the World Bank in Washington DC and Co-Chair of the meeting Jim Yong Kim.
Improving healthcare and the quality of education are proven both to reduce inequality and foster sustainable growth, he added. Meanwhile, Chief Executive Officer and Vice-Chairman of the Board of Directors of Itau Unibanco, Brazil and Co-Chair of the meeting said that "to reduce inequality, the best answer is growth". The world had had a tough few years but "now we are more optimistic, because the US economy is coming back. We will see better results in the next five years than we saw in the last five", he noted.
Chief Executive Officer of the Alliance Trust in the UK Katherine Garrett-Cox, Chief on her part, sees reasons for hope. "What I am taking from this meeting is a huge sense of urgency, especially from the business community", Garrett-Cox, also Co-Chair of the meeting said. As for Executive Director of Oxfam International in the UK and Co-Chair Winnie Byanyima, she said that "growth must touch everybody and lift everybody if it is to be sustainable". She said that she had met many business leaders in the meeting, ready to commit to reducing inequality and to mitigating the impact of climate change but that political leaders are falling behind.
In the same context, Director of Chatham House, UK Robin Niblett said that "Governments are being delegitimized in many parts of the world. They are struggling to keep up". However, he also sees promising signs for 2015, including the European Central Bank's adoption of quantitative easing and the boom in alternative energies, which low oil prices will not stop.
At the same time, central bankers and economic leaders were more upbeat about economic prospects for the year ahead. With the International Monetary Fund (IMF) forecasting 3.5 percent growth this year, panelists at a session on the global economic outlook pointed to the upside potential of the European Central Bank stimulus package, falling oil prices, structural change in Brazil, China and Japan, and robust growth in the United States.
The ECB decision on quantitative easing (QE) lays the ground for stimulus in the Eurozone but the challenge now is for governments to move ahead with structural reforms. "We have done our part, but the ECB cannot raise productivity, increase employment or encourage investment. That requires a more comprehensive set of reforms", said Benoit Coeure, Member of the Executive Board of the European Central Bank in Frankfurt. Explaining the ECB's intervention, he said that "we could not sit by and watch the political foundations of the European project being undermined."
Other panelists welcomed the ECB package while underlining the need to back up this monetary manoeuvre with structural reforms, including labor market reform and fiscal stimulus to increase aggregate demand. "QE creates the space for the structural reforms and investment", said Deputy Managing Director at the International Monetary Fund (IMF) in Washington DC Min Zhu.
The decline in the oil price is a boost to growth in most economies and will ease the transition to structural reform. This is the case in Brazil despite its growing oil production. Minister of Finance of Brazil Joaquim Levy, said the country is shifting from increasing incomes of its poorest citizens, which was the focus of its economic policies for the past decade, to building investment, both by companies and the government. "Our goal is to make Brazil a nimbler, more agile market, where it is easier to do business", he said.
Japan is also well into implementation of a program that includes aggressive monetary easing, gradual fiscal consolidation, and structural reform that are intended to lay the foundations for 2 percent growth this year. Haruhiko Kuroda, Governor of the Bank of Japan, is upbeat not only about Japan's growth prospects but also about China. "China is making huge structural reforms while continuing to grow at 7.5 per cent", he said.
US economic performance is strong and provides a significant boost to global demand. But Zhu warned that much of the growth is coming from consumers and government spending, with private investment still relatively low. Meanwhile, he called on policy-makers to put the poorest countries, which have been battered by economic headwinds, at the top of the policy agenda.
Technology will play a huge and unpredictable role not only in the real economy but also in the financial sector through payments and trading systems. The potential is huge but prudence is necessary, said Governor of the Bank of England Mark J. Carney. "We don't want to find ourselves in an Uber situation in the financial markets", he added.
More than 2,500 participants are taking part at the 45th World Economic Forum Annual Meeting in Davos-Klosters, Switzerland from 21 to 24 January.