The President of the World Economic Forum: “We haven’t seen this type of global debt since the Napoleonic Wars”

Borge Brende, the president of the World Economic Forum (WEF), has offered a bleak outlook for the global economy, saying the world will face a decade of low growth if adequate economic measures are not implemented, reports Reuters.

Speaking on Sunday at the WEF’s “Special Meeting on Global Cooperation, Growth and Energy for Development” in Riyadh, Saudi Arabia, he warned that global debt ratios are close to levels not seen since the 1820s and that there is a risk of “stagflation” for economies advanced.

“Global growth [estimare] this year it is about 3.2 [%]. It’s not bad, but it’s not what we’re used to — the growth trend has been 4 percent for decades,” he told CNBC’s Dan Murphy, adding that there is a risk of a 1970s-like slowdown in some economies major.

“We cannot enter into a trade war, we still have to trade with each other. Trade will change and global value chains — there will be more closeness and more support between friends — but we shouldn’t throw the baby out with the bathwater… Then we have to deal with 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 explained when asked about avoiding a period of low growth.

He said that governments need to look at how to reduce this debt and take appropriate fiscal measures without getting into a situation where it triggers a recession. He also referred to persistent inflationary pressures and said that generative artificial intelligence could be an opportunity for the developing world.

His warning comes as a recent International Monetary Fund report noted that global public debt rose to 93% of GDP last year and was still 9 percentage points higher than pre-pandemic levels.

The IMF estimated that global public debt could reach 100% of GDP by the end of the decade. The fund also pointed to high debt levels in China and the United States, saying loose fiscal policy in the latter puts pressure on interest rates and the dollar which then raises funding costs around the world, amplifying pre-existing fragilities.

Earlier this month, the International Monetary Fund slightly raised its growth forecast for the global economy, saying it had proved “surprisingly resilient” despite inflationary pressures and changes in monetary policy.

It now expects the world economy to grow by 3.2% in 2024, just 0.1 percentage points above the January forecast.

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 Iran-Israel tensions.

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

Hong Kong’s gross domestic product (GDP) likely grew between 2.5% and 3.5% in the first quarter, maintaining moderate growth for the fifth consecutive quarter, the city’s finance chief said on Sunday, Reuters reports.

The January-March GDP, scheduled to be published on Thursday, is expected to be “within the range of the full-year economic growth forecast,” Finance Secretary Paul Chan said on his blog, without elaborating.

Chan estimated in February economic growth of 2.5% to 3.5% this year for Asia’s financial hub, after an expansion of 3.2% in 2023.

As Hong Kong looks for new sources of growth, mega events such as fireworks will be held to attract more tourists, Chan said, adding that 800,000 visitors are expected to visit the city on Wednesday for the Day celebration Labor in China.