Worst is not over yet: Davos greets global economic revival with caution

Written by Associated Press | Davos, Switzerland | Updated: Jan 29 2013, 08:35am hrs
The fragile state of the world economy, along with the relentless turmoil in Syria and the rocky fallout from the Arab Spring, dominated discussions during this years annual gathering of the global elite at Davos, leaving many participants uneasy about what lies ahead as they left for home Sunday.

Even broad agreement that there are some positive signs on the economic front, at least in emerging markets, was coupled with a warning from the head of the International Monetary Fund. Do not relax, Christine Lagarde said. There's still a risk of relapse.

More than 2,500 of the best and brightest in business, government, academia and civic life gathered for the five-day World Economic Forum at this Alpine resort.

But much of the overt glitz and glamor that is a usual feature was toned down or absent this year, a decision founder Klaus Schwab said reflected the serious issues facing the world.

Political and economic issues vie for top billing each year at Davos, and this time, the economy had the edge, with a special focus on how to promote economic growth and jobs, especially for the youth among the world's 220 million jobless.

The IMF said that China, Africa, and other emerging markets could see significant growth, but Japan, eurozone nations and the US are likely to struggle with negative to low growth. Ahead of the 43rd forum, the IMF downgraded its forecast for global economic growth this year by one-tenth of a percentage point to 3.5 percent.

While the US avoided the so-called fiscal cliff'' of automatic tax increases and spending cuts, and fears have abated that the euro currency union will break up, there is growing concern that governments may ease up on measures to improve growth and reduce debt that the IMF and many other institutions are calling for. IMF chief Lagarde said the very fragile and timid recovery'' depends on leaders in the 17-nation eurozone, the United States and Japan making the right decisions.'' The eurozone in particular is fragile because it is prone to political crisis'' and slow decision-making, she said.

Davos participants' uneasiness about the world economy was matched by growing concern over the political turmoil in the Arab world, terrorism in North Africa, a spate of natural disasters that have highlighted the failure to tackle climate change, and the growing inequality between the world's haves'' and have nots.''

Two years ago, gloom around the stalled economic recovery was leavened by euphoria at the outbreak of the Arab spring,'' Kenneth Roth, the executive director of Human Rights Watch, told The Associated Press This year, relief at the improved economic outlook is tempered by despair at the unimpeded slaughter in Syria, uncertainty about the outlook in Egypt, and frustration over the Arab monarchies' resistance to reform.''

Democracy is far from certain, and economic woes have left hundreds of thousands of young people jobless and frustrated that their revolutions'' haven't produced any dividends.

Angel Gurria, secretary-general of the Paris-based Organization for Economic Cooperation and Development, said the focus on resolving the world's economic crisis has distracted leaders from many other important issues, including education, the social consequences of unemployment and promoting ways to deal with climate change.

Nonetheless, Gurria said, the world should be very worried'' because there aren't many tools'' left to fix the economy if things get worse.