Though a small town of around 11,000 people, the Swiss resort of Davos has an outsize influence on global affairs. Every January, the resort is host to the World Economic Forum’s closely watched annual conference, at which political and financial leaders convene to discuss the changing state of the world.

Overnight, Davos’ population swells by 3,000 as delegates – this year including the Chinese premier, Li Qiang, the European Commission president, Ursula von der Leyen, and France’s President Emmanuel Macron – descend on the town, followed closely by journalists.

Rebuilding trust

Unsurprisingly, geopolitical themes dominated this year’s Davos conference. Armed conflicts and supply-chain rebalancing were among the most discussed topics, says Investec Bank South Africa’s Chief Executive Officer Richard Wainwright, who attended the five-day event. And with the world facing a volatile political moment, the erosion of trust between nations – and indeed between voting populations and their political leaders – emerged, says Wainwright, as a major concern.

“[These events] have led to a lot of tension and mistrust between nations, and some of the surveys I’ve seen show that citizens have lost faith in their political leaders,” Wainwright says.

The political and business heads at the conference recognise the disquiet, he adds, especially with many countries conducting elections this year, and understand that trust needs to be rebuilt both on a domestic and international scale.

“If one looks at the role of leaders, your primary role is to give people hope, a hope of a better future for yourself, your family and your children,” Wainwright says. “My sense, coming out of Davos, is that we are not getting back to pre-pandemic growth rates as the world rewires itself, and we are going to have some volatility for some time. But from an interest-rate point of view, I think the recessions that people were worried about are behind us, and the sense is that we are going to have a soft landing.”

Growth challenges

Investec Group Finance Director Nishlan Samujh, who also attended the conference, echoes Wainwright’s sentiments. The geopolitical challenges facing the world are deeply concerning, he says, though he also expresses a similar cautious optimism on the economic front.

“While I do think that we should see some relief with regard to interest rates in 2024, the time for free money is long gone, and higher interest rates will persist,” Samujh says.

Many investors expect the world’s central banks to launch cutting cycles in the near future, with some market participants predicting that the US Federal Reserve will enact its first cut as early as March 2023. The Bank of England and the European Central Bank, meanwhile, are not predicted to slash their respective interest rates until later in the year.

“We’ve seen inflation moderate around the world, but there are still risks – to supply chains, for example,” he adds.

With the International Monetary Fund forecasting world GDP to rise by around 3% in 2024, Wainwright and Samujh noted that conference attendees were acutely aware of the obstacles facing global growth, and the chance that geopolitical instability could have serious knock-on effects on the world economy.

“Nishlan talked about the stickiness and the volatility of inflation – as conflicts get out of control, you will have that,” Wainwright says. “And very recently, we’ve seen the Houthi conflict in the Red Sea. A material percentage of global trade goes through the Suez Canal, so there is downside risk.”

Further, the set of countries driving global GDP is also undergoing something of a reshuffle, Wainwright adds. China’s role may well diminish, he notes, as the nation becomes increasingly focused on domestic issues, including a stricken property sector and a host of demographic challenges.

“You’re not going to see China going back to the 6%, 7% or 8% [growth rate] – it’s probably consolidating at the 4-5%,” he says. “The economy that has come really well out of the pandemic is India. It’s a massive growth engine with a lot of sustainability.”

Samujh and Wainwright add that the likely path for growth in the United States was something of an “iceberg” for Davos delegates, with many conference attendees they spoke with feeling uneasy about the nation’s 2024 outlook. Most felt that an electoral victory for former president Donald Trump would be likely, and that a second term for the Republican front-runner would mean additional volatility for global investors.

Artificial intelligence on the agenda

Another key point of discussion at the event was the ascendance of artificial intelligence (AI) and the potential impacts of the technology on jobs and economies around the world. Samujh says that conference attendees anticipated the productivity gains that AI could drive, pointing to natural language processing as a particularly exciting area.

“If used properly, the story about AI should not be the loss of jobs – I think there will be a need to re-engineer the way we approach work,” Samujh says. “Predictive AI will deal with automating high-frequency tasks without a lot of change in processing, while generative AI means a ‘partner’ alongside every human. The risk of misinformation, particularly around an election period, is high. So, we look to providers to introduce techniques to [mitigate] that risk. Some countries have thought more deeply about this, such as Singapore, Denmark and, to an extent, the US.”

Wainwright adds that AI-related competition is likely to become an increasingly important theme in 2024.

“The genie is out of the bottle, and different countries will implement it at different paces,” he says. “And there is competitiveness around [the topic] – the US has not given China access to certain of its chips, which allow large language models to operate.”

Generative AI applications are in use across “the private space, in a global competition among companies, and also by governments, in national security,” Wainwright adds, noting that the US’s efforts to prevent China from accessing American-made hardware could lead to an asymmetric distribution of AI capabilities around the world.


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