UN Chief Warns of Global Economic Crisis at World Economic Forum in Davos

Secretary-General António Guterres (right) meets with Klaus Schwab, founder and chairman of the World Economic Forum, in Davos, in January 2023. UN Photo/Manuel Elías

United Nations Secretary-General Antonio Guterres offered a grim outlook on the global economic during the World Economic Forum’s 2023 summit in Davos, Switzerland, warning of a possible worldwide economic downturn.

“We are looking into the eye of a Category 5 hurricane. Our world is plagued by a perfect storm on a number of fronts,” Guterres said. “Start with the short term, the global economic crisis. The outlook, as we all know, is bleak. Many parts of the world face recession, and the entire world faces a slowdown. And we see deepening inequalities and the rapidly unfolding cost of living crisis ... supply-chain disruptions and an energy crunch, soaring prices.”

Citing the “perfect storm” of the Russia–Ukraine war, high food prices, and high energy costs, Guterres said that there will be “huge economic consequences” around the world. He did not predict, however, when the slowdown would start.

“I’m worried with the fact that we have a combination of things that are all interlocked and that have negative synergies,” he told Fox Business’s Maria Bartiromo in an exclusive interview at the Davos event on Wednesday.

Guterres noted that economies outside the United States, Europe, and Asia would face worsening economic conditions. Developing countries in Africa, South America, and much of Asia are seeing rising interest rates, he noted.

“Interest rates are going up extremely in the global south. Countries are close to default. They have no resources because they couldn’t print money like the United States did, like Europe did during the COVID-19 [pandemic],” the UN chief told Bartiromo. “They have no access to concessional funding because many of them are middle-income countries. Look at small island developing states, the Caribbean islands.”

Some of those countries, he added, “lived on tourism” and “tourism has ended for two years, but as they are middle-income countries, they had no debt to live, they had no concessional funding.”

Guterres said that the United Nations is proposing a global stimulus plan to address economic woes, and claimed that economies should transition from oil and gas to other energy sources. “We need to do that in a just way,” he said, adding that “this transition needs to be well-managed.”

Meanwhile, the West and China need to have “serious” negotiations amid the dim global economic outlook, said the UN chief.

“With the slowdown of the global economy, with the dramatic situation of the developing world, with the risks of a pandemic coming back, I think it is absolutely essential to have a serious negotiation on the table where everything is put very clearly between China and the Western world,” he told Bartiromo.

Other Warnings

While inflation has eased at the consumer and producer level in the United States in recent months, a number of economists and business leaders say that Americans should prepare for a recession starting in 2023. The Federal Reserve has raised interest rates to their highest levels in decades in order to cool high inflation that reached more than 9 percent in June 2022, though it has since dropped to below 7 percent.

In an opinion piece over the weekend, two top economists told Americans they shouldn’t “be fooled” by rosy predictions and that a recession is likely.

“Some economists argue that the strength of the labor market—as well as household balance sheets—will keep the economy strong enough to avoid a recession,” wrote Lakshman Achuthan and Anirvan Banerji, co-founders of the Economic Cycle Research Institute, for CNN’s website. “We disagree,” they wrote, saying that “it remains our expectation that the U.S. economy will enter a recession this year.”

Noting that the tech sector has already been hit with layoffs starting in late 2022, the pair opined that there will likely be more layoffs in the near future. This week, for example, Microsoft announced that it would slash 10,000 jobs as the Windows operating system maker braces for slower growth.

“I’m confident that Microsoft will emerge from this stronger and more competitive,” Microsoft CEO Satya Nadella told employees in a memo on company’s website on Wednesday.

Other tech firms, such as Amazon, Meta, Alphabet, Salesforce, and Twitter, have announced similar moves in recent weeks.  Microsoft, based in Redmond, Washington, had 221,000 full-time employees as of June 30, 2022, according to government filings.

“As we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less,” Nadella wrote. “We’re also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one.”

A number of mainstream media outlets, too, have confirmed layoffs due to economic uncertainty and volatility. Those layoffs were punctuated by viral videos showing Washington Post employees angrily asking questions of publisher Fred Ryan at a town hall meeting as he refused to take questions and walked out.