Global uncertainty passes through Davos: few answers, many concerns

The annual meeting of the world’s economic and financial elite in Davos ended Thursday morning. This year’s theme: rebuilding trust. Confidence in the face of a changing world in which adverse economic/political events and conflicts are proliferating. The impression from the Davos panels is perplexity in the face of what seems if not “a completely new era, at least a new reality” as Forum Director General Mirek Dušek put it. 

On Thursday, Christine Lagarde spoke, who, speaking of interest rates, left open the possibility of cutting them after the summer. Indeed, at the moment we are “on the right path” toward a return to 2% inflation, however, “until we are convinced, we are not singing victory,” she explained. Referring in particular to the market’s overly optimistic estimates, which would have wanted an interest rate cut before the summer. On the same day, not surprisingly, Eurostat confirmed how inflation rose from 2.4% in November to 2.9% in December – down from the peak of 10.6% in October 2022, but still well above the ECB’s target rate of 2%. Inflation is forecast to fall to 2.7 percent this year and then drop below 2 percent in 2026.

However, uncertainty remains over escalating tensions in the Middle East: the stop of trade through Suez could cause a price shock in maritime trade. In this regard, Davos has witnessed shipping giants, such as Maersk and Hapag-Lloyd, take a step back from the Strait of the Horn of Africa for older, safer routes: circumnavigating Africa. According to Maersk CEO Vincent Clerc, the difficulties may continue “at least for a few months, hopefully less, but it is unpredictable how this situation may develop”. Concerns also shared by Minister Tajani, who on Wednesday, inaugurating the Italian presidency of the G7 at the Farnesina, stated how the country intends to position itself as a privileged interlocutor – together with France and Germany – for not only military but also diplomatic action to protect Italian exports in the Red Sea.

Because the risk with the Suez Canal blocked is a halt to ports in the Mediterranean, which are the first to be damaged by these bottlenecks. “Bottlenecks that could be a problem for inflation” echoed from Davos the concerns raised by Tajani by Economy Minister Giorgetti, who is engaged in the delicate task of convincing foreign investors of the soundness of the national public debt. But not only that, Giorgetti is in Davos to attract investments. Those connected with the privatization plan envisaged by the government, and which would concern in particular Ferrovie and Poste Italiane, and those destined for the Italian public debt that will have to be renewed en masse this year, on which geopolitical uncertainties weigh. “Difficult to hit the GDP estimates if a war breaks out every month,” Giorgetti chides from the Swiss Alps. Meanwhile, in Italy, Istat on Tuesday confirmed the inflation numbers for 2023, certifying an increase in the national consumer price index of 0.2 percent on a monthly basis and 0.6 percent on an annual basis, with overall growth of 5.7 percent (it was +8.1 percent in 2022).

On the domestic politics side, the week was marked by confrontation, all within the majority, ahead of the upcoming Regional elections. There were two knots: Sardinia and third term. At least on the first front the situation dissolved yesterday, when the candidate close to the Lega was chosen over FdI’s Paolo Truzzu. Accomplice to the decision was the investigation opened against Christian Solinas who was investigated for corruption in an inquiry a year ago.