Davos day 4: global economic outlook in focus – business live

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Key events

Valdis Dombrovskis, the EU trade commissioner, warns against fatigue setting in over the Ukraine war.

Sanctions are working, Dombrovskis tells Davos, predicting Russia’s downturn will continue.

“If we look, Russia’s economy was in recession last year and will be in even deeper recession this year.”

Dombrovskis points out that Russia’s economy was helped by energy prices being at record highs, due to the impact of the Ukraine war.

He says sanctions are having a cumultative effect, with personal, trade and economic restrictions working together.

It’s important to keep pressure on Russia’s energy sector through sanctions, Dombrovskis continues, saying “we were a bit slow and late” with the Russian oil embargo in the European Union and the oil price cap in the G7.

It is “very important to stay the course”, he concludes.

Ken Rogoff: Russia is heading to incredibly poverty due to sanctions

Davos has heard this morning that sanctions on Russia are playing a vital role in the Ukraine war.

Ken Rogoff, Harvard University economics professor, is telling delegates that while the war will be decided by military action, sanctions are having a significant impact on Russia’s economy.

Russia, Rogoff says, is heading towards become Cuba, Venezuela, perhaps a giant Iran – with incredibly poverty compared to what Russians are used to.

Rogoff believes Russia’s economy is weaker than the offical statistics, saying he doesn’t believe anything Russia says when it comes to numbers.

Rogoff points to underemployment levels, and fiscal revenues showing manufacturing and other parts of economy are slowing down.

The most important sanctions are the ones that slow Russia’s milirary machine, Rogof explains. He suggests there should be a further clampdown on the grey market, as consumer devices have chips which can be repurposed for military purposes.

I woud absolutely not draw the conclusion that sanctions are not working. They are second to military intervention, but they’re absolutely important, Rogoff insists.

He also says there are examples where sanctions can achieve regime change, such as in apartheid South Africa.

Rogoff says:

“If you keep up sanctions for a long time, and make them stronger and stronger, they do work”

Introduction: Economic outlook in the spotlight

Good morning from Davos, where the final day of the World Economic Forum is underway.

Hopes that the world economy might only suffer a mild recession will be tested today, when top central bankers and policymakers give their assessment of the situation.

Kristalina Georgieva, managing director of the IMF, Christine Lagarde, president of the European Central Bank, and Bank of Japan governor Kuroda Haruhiko all appear on a panel on the economic outlook, alongside French finance minister Bruno Le Maire and professor Lawrence Summers.

They will discuss the future of growth, and the policies needed to stabilize the global economy, from 11am Davos time (10am UK).

The chatter here is that the world economy might pick up in the second half of this year.

That’s despite polling suggesting business leaders and economists were notably gloomy, and signs that the engines of global growth are slowing, with more households and businesses facing economic distress.

Davos delegates are also pondering how the UK’s economic outlook might change under a future Labour government, after Keir Starmer and Rachel Reeves attended Davos yesterday.

Where’s Rishi? Neither Sunak or Hunt are at @Davos this year for reasons that aren’t very clear. There’s a gap on stage and Labour is filling it. This is a remarkable photo - Starmer + Reeves chatting with executives from the big global banks - JP Morgan, Citi, Morgan Stanley. pic.twitter.com/rdOLlUYCQa

— Joel Hills (@ITVJoel) January 19, 2023

Starmer condemned Rishi Sunak’s decision not to attend Davos – and some in Davos agree it was a mistake by the PM.

One business figure told us yesterday:

“Rishi was straitjacketed and took the decision not to come last year in a moment when it felt unviable. Things have moved on.

Rishi would have stolen the whole show.

“Starmer and Reeves have set the tone really well. They are here to promote themselves but they have done it on the pretext of promoting the UK, which is filling a vacuum left by Rishi.”

The Labour heavy hitters’ message to Davos was that Britain would be ‘open for business’, as they tried to woo world leaders and chief executives with a reassuring message.

They also rubbed shoulders with the WEF elite at JP Morgan’s party on the Davos promenade last night, where Starmer chatted with Tony Blair and Jamie Dimon.

Russia’s economic outlook and the impact of artificial intelligence are also on the agenda today.