The international economy is ailing

World economic outlook

In Davos, none of the world's intractable problems have been resolved, despite speeches by many intellectuals, including United Nations Secretary-General António Guterres.

He spoke from a rather pessimistic angle on more than one issue, including climate change and its disastrous effects on the Global South, as well as efforts towards resolving energy and food supply crunches, poverty, and immigration.

Solutions to global problems were thin on the ground. In the absence of Russia and with a modest representation from America, China, and even the European Union — which contented itself with the presence of German Chancellor Olaf Scholz — finding answers was never going to be easy.

And the list of problems was long, from the energy crisis, global warming, and development aid to the treatment of debt and issues of security, immigration, and digitisation.

In the absence of Russia, and with a modest representation from America, China, and even the European Union, finding answers was never going to be easy. The list of problems was long, from the energy crisis, global warming, and development aid to the treatment of debt and issues of security, immigration, and digitisation.

Rather, it appears the fate of global trade has become more threatened than ever by the back-and-forth sanctions between Russia and Western countries on the one hand and the US and China on the other, in the most critical crisis since the establishment of the World Trade Organisation in 1995.

Russia-Ukraine war steals focus

The Russian war on Ukraine, which is entering its second year, has hijacked all international political, media, and economic attention. Speakers from the EU tried to limit the discussion to the gas issue and the dangers of the war on Europe's economic future, as well as the Russian threat.

They also seemed to disagree on how to deal with what former US State Secretary Henry Kissinger called the "realpolitik", or real-terms politics, that this war imposed, whether it be military and financial support, how to deal with the energy and gas supply crisis, or how to defy the growing sway it has given the Chinese dragon and, perhaps more importantly, the Russian bear in the Global South, especially in some African states with failed security systems.   

Russia's influence in Africa has become an indirect expansion of the Ukraine conflict, and nowhere is this clearer than in the flagrant struggle for power in the continent between Russia and Europe.

While the Wagner Group, an armed militia directly affiliated with Russian President Vladimir Putin, gains sway Africa, the former European colonial powers are in decline. Recently, Burkina Faso demanded the French Army leave the country within a month's time.

New world order in the making

Participants from 130 countries departed the World Economic Forum with the impression that a new world is taking shape, albeit shrouded in ambiguity and uncertainty due to deep-rooted conflicts and crises spanning the epidemiological, economic, political, military, scientific, technological, and cyber domains.

However, there is a near consensus that everyone is affected by the current situation and the continuation of the Russian-Ukrainian war, albeit to varying degrees, with the European Union seemingly taking the biggest hit.

The truth that everyone identified in Davos is that there is no solution to global issues without a resolution of the Russian war on Ukraine. The far-fetched outcome, it appears, is not certain to be viable before the 54th session in 2024.

Unlike its predecessors over the decades, this is the first economic summit to be held in Europe while a fierce war rages in the north-east of the continent, marking the return of the Cold War to Europe at the very least. The Berlin Wall era will likely give way to an epoch focused on Helsinki and Stockholm, as the two Scandinavian capitals endeavour to join Nato.

Their accession, however, depends on Turkey's approval. The country was recently provoked by the burning of the Holy Quran at the hands of an extremist group in Sweden, in a show of political pressure and a reflection of backwardness from a so-called civilised country.

As long as Stockholm does not agree to Ankara's conditions, the status of the alliance will remain uncertain, which will serve Russia's interests, extend the war, and pave the way for new weapons and more funding.

This will raise the question of whether the EU will be able to withstand this debilitating war in light of the difficult social conditions in Europe, namely in France, where a French Spring seems to be brewing, driven by demands to retract a new retirement law raising pension age to 64.

For the first time, the allies are in shambles over how to provide military support to Ukraine to limit the Russian expansion south and west.

What worries Europe is that the timing of the war is not appropriate economically, socially, or geopolitically.

Putin is swallowing what was lost in the negotiations between Boris Yeltsin and Bill Clinton in 1991 that paved the way for ending the Cold War, dismantling the Soviet Union, and emancipating the countries of Eastern Europe that became part of the European Union.

What worries Europe is that the timing of the war is not appropriate economically, socially, or geopolitically.

Brussels, meanwhile, may have fallen into an American trap.

According to European analysts, Belgium is not capable of engaging in an open war with what it describes as an arrogant bear, which is a red line, nor is it collectively able to solve its wintertime energy problem after imposing economic sanctions on Russian energy under American pressure.

In another first, countries are opting for individual, perhaps even surreptitious, solutions outside the unity of Europe for various needs, including gas and energy supplies, future industries, raw materials, green hydrogen, or the necessary supplies for an almost exceptionally challenging period.

A clear disagreement and divergence emerged between Germany and France, the two backbones of the European Union since its foundation 60 years ago as a European economic community comprising six member states only.

On the one hand, the Germans were not enthusiastic about providing the Ukrainian army with heavy Leopard 2 tanks before the Americans delivered their Abraham battle vehicles.

On the other hand, Berlin did not give Poland the green light to supply the Ukrainian army with German tanks. The message Berlin intended to make clear is that any change in the type of weapons from defensive to offensive may be a pretext for Russia to escalate its own use of weapons.

The peoples of Central Europe do not seem ready for World War III, even if the Ukraine war continues for a longer period of time, as long as it does not cross the borders of the European Union.

As it awaits a solution that may not come from a third party, Europe gets further drawn into Putin and Zelensky's war with every passing day.

Arab countries reap the benefits

Those who followed the Davos Summit closely may have noticed that the countries of the Middle East and North Africa and other developing countries tried in their speeches to distance themselves from the Eastern-Western conflict, limiting their addresses to their achievements and their right to more sustainable development and investment flows.

They called for stabilising prices, curbing international inflation, ensuring supplies, and preserving what little remains of nature's bounty that was not exhausted by the gluttony of industrialised countries over the decades, leading the world's natural resources from abundance to want.

The Mena region seems to be benefiting from the geopolitical shifts and may have a greater presence in the new multilateral world order. It might also witness some regional detente as the war between the once allied Russia and Nato states rages on.  

Growth forecasts for 2023 show a continued improvement in the economies of some Arab countries, especially the countries of the Gulf Cooperation Council and some North African countries, especially Morocco and Egypt, driven by the decline in global inflation rates, the increase in demand for industrial exports, and the achievement of growth rates exceeding 3%.

Growth forecasts for 2023 show a continued improvement in the economies of some Arab countries, especially the countries of the Gulf Cooperation Council and some North African countries, especially Morocco and Egypt.

This is offset by a significant decline in growth rates in major states, especially in EU markets, where growth hovers above zero, while the socioeconomic situation is further aggravated by the war in Ukraine, internal disputes, a receding international influence, and the loss of markets and natural resources from the countries of the Global South in favour of China and the New World.