Economic woes dampen Davos
Posted by meb at January 24th, 2008
Concern that the biggest economies are headed into recession dominated the debate as chief executives and investors gathered yesterday for the World Economic Forum in Davos, Switzerland. “The world economy cannot decouple from a U.S. hard landing,” said Nouriel Roubini, founder of Roubini Global Economics LLC. Morgan Stanley’s Asia Chairman Stephen Roach called the prospect of global recession a “close call.”
The likelihood that the fallout from the U.S. housing slump will hobble growth overshadowed the opening sessions of the annual meeting in Davos, where executives including Cerberus Capital Management LP Chairman John Snow and Royal Dutch Shell Plc’s Chief Executive Officer Jeroen van der Veer have convened.
The threat of shrinking economies ranked first among concerns of business leaders surveyed by PricewaterhouseCoopers LLP. The mood in the Swiss resort contrasts with the buoyancy of last year’s meeting where guests celebrated a bumper year of corporate profits and bonuses, and the strongest global economy in three decades, on the ski slopes and party circuit. “Fear of a U.S. recession is in the air,” Juergen Grossmann, chief executive of RWE, Germany’s second-biggest utility by market value, said in a Bloomberg Television interview. “Obviously, that is dampening the mood.” “The rate cut was helpful, and the stimulus package will be helpful,’” David Rubenstein, co-founder of Carlyle Group, the world’s second-largest buyout firm, said in an interview in Davos.
“I think we can avoid a recession.” The Fed is saying “we are there to clean up after bubbles first rather than to prevent the danger,” Stephen Roach, Morgan Stanley’s Asia chairman, said in a panel discussion in Davos, Switzerland. “It’s a dangerous, reckless and irresponsible way to run the world’s largest economy.”
`Island of Stability’
Russia is “an island of stability” that will help bolster the global economy and foreign investors will not be deterred by a possible U.S. recession, Finance Minister Alexei Kudrin said. “Interest toward Russia as an island of stability will increase” as the U.S. economy falters and global growth slows, Kudrin told reporters in Davos. Russia, the world’s 10th biggest economy, doesn’t plan to alter its forecasts for growth or inflation this year, Kudrin said. The government expects the $1.1 trillion economy to expand at least 6.7 percent this year from about 7.6 percent last year and the inflation rate to slow to 8.5 percent from 11.9 percent. All of the “many foreign companies” who have met with Russian officials at Davos this week promised to invest “hundreds of millions of dollars in Russia,” Kudrin said. “Their plans are not changing.”
No sudden stop in Turkey
The potential recession of the U.S. economy is likely to impact all emerging markets, noted Sertan Kargın, chief economist at Türkiye Ekonomi Bankası (TEB). “As the U.S. economy makes fourth of world economy it is not rational to expect emerging markets to be fully immune to the impact of a potential recession,” he said. “Although growth of Turkish economy is unlikely to be as robust as it has been in the past five years, it has the potential to maintain its performance. There will be no sudden stop,” Kargın said.
source: Turkish Daily News
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