The Top Four Takeaways From the 2023 World Economic Forum Annual Meeting in Davos

The World Economic Forum's (WEF) 2023 annual meeting in Davos, Switzerland is over and in the books, and several takeaways dominated the narrative and post-meeting headlines. Among the most popular topics covered at this year's annual meeting were the Metaverse, central banks and interest rate expectations, the transition to green energy, and trade and investment.

1. Trade and investment

One key theme at the WEF annual meeting in Davos this year was trade and investment, with critical concerns cited as geopolitical shocks, globalization, climate action and technology. Despite the widespread inflation around the world, supply chain issues that lingered since the pandemic, and geopolitical shocks like the war in Ukraine, global trade reached a new record volume of $32 trillion in 2022.

Nonetheless, many economists remain concerned about a significant economic downturn that affects the entire globe. Despite the many global problems facing the world today, Ngozi Okonjo-Iweala, director general of the World Trade Organization, urged WEF attendees to seek multilateralism, cooperation, and trade.

There was also talk about the "polycrisis" facing the world, which threatens to fragment global trade. Several WEF speakers opined that multilateralism and cooperation are still effective tools for prosperity. One estimate suggested that even a split into two blocks would cost the world 5% of global GDP.

Additionally, the WEF declared in a follow-up post that economic fragmentation and so-called "friendshoring" are likely to be expensive due to inefficiencies and duplication that lead to inflation.

2. Calls for central banks to stay the course on inflation

Of course, no global economic meeting would be complete without discussions about interest rates, especially at such a crucial moment for the global economy. This year's speaker's included International Monetary Fund chief Kristalina Georgieva, who urged the world's central banks to stay realistic and hold steady on interest rates.

She advised regulators to "stay put," adding that things are "less bad than we feared a couple of months ago, but less bad doesn't quite yet mean good." At this year's WEF annual meeting, many central bankers expressed cautiously optimistic views as inflation appears to be flattening and moderate growth rather than a recession is expected.

However, Georgieva clarified that that the outlook for the global economy remains poor, as their projected 2.7% growth rate "by far is not fabulous." It's the third-lowest growth rate since the global financial crisis and COVID.

She also warned that as the Chinese economy fires back up after lying dormant for three years during the pandemic, it could ignite a conflagration of inflation, just as the rest of the world comes to grips with it. Georgieva explained that faster growth in China could lead to jumping oil and gas prices, pressuring global inflation.

Larry Summers, a Harvard professor and former U.S. Treasury Secretary, made similar comments. He advised central banks to resist political and public pressure to ease up on their attempts to rein in inflation. Summers said it would be "a grave error for central banks to revise their 2% inflation targets upwards," adding that a failure to deal with inflation would likely lead to a "larger and more serious recession" at some point.

3. The Metaverse

The WEF annual meeting was sure to address the Metaverse at some point, and the topic began to creep into the discussions in 2023. One panel focused on building the Metaverse. Despite being a nascent technology, the top global players have invested about $180 billion in building the Metaverse over the past three years. A wide array of investors of all kinds have been excitedly seeking out ways to secure a piece of the Metaverse pie for themselves.

With all the available capital to fund the building of the Metaverse, many technologists see numerous applications for the technology. For example, a recent WEF post related to this year's annual meeting highlighted the potential industrial applications. The authors stated that the concept of an industrial metaverse has captured significant attention over the last 12 months.

This concept encompasses what they described as "a highly immersive and connected virtual and physical reality enabling never-before-seen levels of connectivity and data analytics." While the precise vision and implementation remain highly uncertain and up for great debate, many of the technologies needed to build an industrial metaverse already exist.

Some of those technologies include the internet of things, artificial intelligence, blockchain, extended reality, and cloud and edge-computing. However, despite the existence of those technologies, many decisions must be made on issues like digital work opportunities, data and security, and competition.

4. Energy transition

This takeaway from the 2023 WEF annual meeting came to a head in 2022 after Russia invaded Ukraine and then proceeded to cut Europe off from its energy commodities. Global leaders discussed how the worldwide energy crisis has accelerated the shift to green energy. The International Energy Agency expects renewables to generate twice as much capacity in the next five years.

While climate concerns have been driving the desire to shift to green energy, those concerns aren't driving the acceleration in that transition. IEA chief Fatih Birol said during the Mastering New Energy Economics panel at this year's meeting that the biggest driver of growth in renewable energy is now energy security.

Some parts of Europe are already making the leap from Russian commodities to other energy sources. German Chancellor Olaf Scholz declared that it only took "a few months" for his nation to become "completely independent from Russian gas, Russian oil and Russian coal.

He also said that Germany's energy supply for the winter is secure, so energy prices in the country have "recently seen a huge drop." By 2030, he expects 80% of Germany's electricity to be produced via renewable sources, which is double the current volume.

Adam Tooze, director of Columbia University's European Institute, said during the De-Globalization or Re-Globalization panel that the European energy transition must be "interconnected" and that there's "a lot of extremely excited talk about the connections." For example, he said Africa would rely on cheap solar, with most of it coming from China and battery technologies.

Over 50 years of progress

For over 50 years, the World Economic Forum's annual meetings have established a place for the world's leaders and top thinkers to come together to mull the biggest problems facing the entire globe. From global problems like the energy crisis and the possibility of worldwide recession to new technologies like the Metaverse, the WEF has become a place where solutions may be born.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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