The effect of geopolitics on global growth worries me most, WEF president says

  • The impact of tumultuous geopolitical affairs on global growth is one of the biggest concerns for the president of the World Economic Forum (WEF).
  • Speaking to CNBC on the eve of this year's forum in Davos, Switzerland, WEF President Borge Brende said geopolitical conflicts, could damage global growth.
Dozens of women, men and their children, many fleeing poverty and violence in Honduras, Guatamala and El Salvador, arrive at a bus station following release from Customs and Border Protection on June 23, 2018 in McAllen, Texas.
Spencer Platt | Getty Images
Dozens of women, men and their children, many fleeing poverty and violence in Honduras, Guatamala and El Salvador, arrive at a bus station following release from Customs and Border Protection on June 23, 2018 in McAllen, Texas.

The impact of tumultuous geopolitical affairs on global growth is one of the biggest concerns for the president of the World Economic Forum (WEF).

Speaking to CNBC on the eve of this year's forum in Davos, Switzerland, WEF President Borge Brende said geopolitical conflicts could damage global growth.

"There are many things that concern me but I would say that those geopolitical conflicts can, if not handled the right way, can have a negative impact on growth," he told CNBC's Hadley Gamble on Sunday.

"We're already seeing a slowing of global growth with the negative impact that will have on a lot of people around the world, also when it comes to creating jobs. We're not out of the woods when it comes to jobs, for example in Europe many countries are still facing 20 percent youth unemployment," he noted.

This year's forum is taking place amid market shifts and heightened uncertainty around global trade and diplomatic relations. In the 12 months since the last forum, the U.S. and China have imposed tariffs of $250 billion and $110 billion on each other's goods, respectively, there is an ongoing government shutdown in Washington over the building of a border wall with Mexico and in the U.K., Brexit remains in limbo as the departure date draws near. Meanwhile in Europe, a raft of countries have seen populist political parties challenge the status quo in recent years.

On the economic front, the global growth outlook is murky too. The International Monetary Fund (IMF) cited trade tensions when it downgraded its global growth forecast for 2019 last October. The IMF expects global growth of 3.7 percent in 2019. It will publish an update to its international growth outlook on Monday.

Borge Brende told CNBC that economic growth was crucial to stability.

"We will need to continue this growth period for more years to also get the necessary ammunition and gunpowder to fight a new recession. Currently, we still have close to zero interest rates in Europe and in Japan and the (use of) fiscal muscles, after many years of stimulating the economy through (the) use of budgets, has left countries with less gunpowder in that respect. So, I hope geopolitics will not have an impact on the global economy," he said.

One planet

This year's attendants to Davos include China's Vice President Wang Qishan, Prince William, the new President of Brazil Jair Messias Bolsonaro, German Chancellor Merkel, Italian Prime Minister Giuseppe Conte and Japanese Prime Minister Shinzo Abe.

Notable absentees this year include U.S. President Donald Trump, French President Emmanuel Macron and U.K. Prime Minister Theresa May amid continuing tumult in their domestic political affairs with the U.S. government shutdown, Brexit impasse and civil unrest in France.

Brende said Trump's absence from this year's forum allowed the meeting to focus on key issues affecting the world.

"We would have liked to have had him (Trump) here but it's also important for us to focus on challenges like slowing global growth, Brexit and the environment. But what is good this year is that it really is a working meeting," he said.

The main theme of this year's WEF meeting is "Globalization 4.0: Shaping a New Architecture in the Age of the Fourth Industrial Revolution." Essentially, WEF has said it is challenging world leaders to come up with an "inclusive" approach to globalization. The theme comes amid a continuing rise in populist politics in many countries and a backlash against globalization that critics argue has not benefited the majority in society.

"I think we really have to understand that we are all in the same boat in the globalized world, Globalization is a fact, we can't stop it, but we should improve it. One of the topics we do have in Globalization 4.0 is that we have to make sure that globalization is more equitable, more inclusive, and creates more jobs," Brende said.

Globalization also has to be sustainable, he added. "We only have one planet and currently we're acting like we have one in reserve and that is not a sustainable track."