WEF President: We haven’t seen this kind of sovereign debt since the Napoleonic Wars

Borge Brende, president of the World Economic Forum (WEF), presented a gloomy outlook on the global economy, saying the world faces a decade of low growth unless the right economic measures are put in place. One emergency is public debt, which has reached levels not seen since the Napoleonic Wars.

Borge Brende warned that public debt is at levels not seen since 1820 and there is a risk of “stagflation” for advanced economies.

“Global growth [estimativă] for this year it is about 3.2%. It’s not bad, but it’s not what we were used to — an average of 4 percent for decades,” he told CNBC, adding that there was a risk of a 1970s-like slowdown in some major economies, he said Brende, at the “WEF Special Meeting on Global Cooperation, Growth and Energy for Development” in Riyadh, Saudi Arabia.

“We cannot engage in a trade war, we must continue to trade with each other,” he added.

“Trade will undergo changes – there will be more reshoring (moving business to the country of origin, from another country) and friend-shoring (relocating business to geostrategically friendly countries). But we should not lose what is essential . Let’s address the global debt situation. We haven’t seen this kind of debt since the Napoleonic Wars, we’re approaching 100% of global GDP in debt,” he said.

His threat dovetails with a recent International Monetary Fund (IMF) report which noted that global public debt reached 93% of GDP last year and was still 9 percentage points higher than pre-pandemic levels. The IMF projected that global public debt could reach nearly 100% of GDP by the end of the decade.

The fund also noted high debt levels in China and the United States, saying loose US fiscal policy is putting pressure on rates and the dollar, which then raises funding costs around the world – exacerbating pre-existing fragilities.

Earlier this month, the IMF slightly revised down its global growth forecast, saying the world economy had proved “surprisingly resilient” despite inflationary pressures and changes in monetary policy. Global growth is now expected to be 3.2% in 2024, a modest 0.1 percentage point higher than the previous forecast in January.

The WEF’s Brende said on Sunday that the biggest risk to the global economy is now “the geopolitical recession we are facing,” pointing to recent tensions between Iran and Israel.

“There is so much unpredictability, and things can easily get out of hand. If Israel and Iran had escalated that conflict, we could have seen a $150 oil price overnight. And that, of course, would have been very harmful to the global economy,” he said.