The main financiers of Wall Street sounded a pessimistic tone about the world economy in an important meeting in Saudi Arabia aimed at negotiating agreements, while a violent conflict between Israel and Hamas spread where thousands of people died.
Attendees at the annual event often take advantage of the opportunity to build relationships with some of Saudi Arabia’s largest companies and its $778 billion sovereign wealth fund, which has captured the promise of business as the kingdom embarks on an ambitious reform plan to wean its economy off oil.
However, the development of the conflict between the Islamist group Hamas and Israel overshadowed the event described as “Davos in the desert”, in reference to the annual meeting of world leaders and business executives in the Swiss Alps.
The President of the World Bank (WB) Ajay Banga said that the geopolitical tension exacerbated by the conflict in the Middle East is the greatest threat to the global economy.
“There are a lot of things going on in the world and in geopolitics, with the wars that we’ve seen and what’s happened recently in Israel and Gaza. In the end, when you put it all together, I think the impact of economic growth is much worse,” Banga said.
While the world’s leading financiers spend less time on the conflict and talk about issues like artificial intelligence, the economic fallout from the war, combined with record debt while rising rates, have created a dire backdrop.
“There is no doubt that if these things are not resolved, it could mean more global terrorism, which means more insecurity, which means society will be afraid (…) and see We’re going to cut corners on our economies,” said BlackRock president and CEO Laurence Fink.
Concerns about rising interest rates
Fink was joined on a panel at the Future Investment Initiative (FII) conference with CEOs of other banks such as David Solomon, of Goldman Sachs; Jamie Dimon, from JPMorgan, and Jane Fraser, from Citi.
They discussed issues such as women in the workplace, but also the implications of rising interest rates.
Ray Dalio, founder of hedge fund Bridgewater Associates, is pessimistic.
“If you take the time horizon, the monetary policies that we’re going to see and so on, it’s going to have a much bigger impact on the world,” Dalio said. “And you look at the global gaps, so it’s hard to be optimistic about that.”
HSBC Group chief executive Noel Quinn also warned of the dangers of heavy public debt. “I am concerned that a tipping point will be reached in fiscal deficits,” he said. “If it comes, it comes quickly, and I think there are a lot of economies in the world where a tipping point could happen that would seriously affect.”
Standard Chartered Chief Executive Bill Winters said he expected the wars in Europe and the Middle East to remain contained and described the interests as “very urgent.”
Interference with Saudi investment plans
The statements come as the Israeli military declares it is preparing for a “relentless offensive” to dismantle Hamas. Former US President Barack Obama warned that “any Israeli military strategy that ignores the human cost could lead to backfiring.”
The conflict could derail stability in the Middle East as regional power Saudi Arabia invests hundreds of billions of dollars in a massive economic transformation plan.
Saudi Arabia has frozen its US-backed plans to normalize relations with Israel, two sources familiar with Riyadh’s thinking said, signaling a rapid rethinking of its policy priorities. foreign at a time when the war between Israel and Hamas is raging.
But financial managers focus above all on business.
Last year, Saudi Arabia spent billions on businesses, from sports to gambling to aviation. This year, Saudi Telecom acquired a nearly 10 percent stake in Spain’s Telefónica.
“Although today’s world seems uncertain, we continue our mandate to encourage (…) the future of business and prepare our societies to create a stronger and more stable order- is in the world,” Yasser al-Rumayyan, governor of the Fund, said in Saudi Arabia’s Sovereign Public Investment.