World facing 'most complex' situation in decades: WEF
[TIANJIN] The world is facing the 'most complex' geopolitical situation seen in decades, the head of the World Economic Forum (WEF) told AFP on Tuesday (Jun 24), warning that turmoil was 'impacting global growth'.
'It is the most complex geopolitical and geo-economic backdrop we've seen in decades,' WEF President and CEO Borge Brende said ahead of a meeting of the multilateral forum in the northern Chinese city of Tianjin.
'If we are not able to revive growth again, we can unfortunately see a decade of lower growth,' he warned.
Officials including Singapore Prime Minister Lawrence Wong will attend this week's WEF meeting in the port city of Tianjin – known colloquially as the 'Summer Davos'.
The meeting comes hard on the heels of the United States' involvement in the Iran-Israel conflict and follows months in which the global economy has been battered by a tariff war launched by US President Donald Trump.
This month, the World Bank cut its forecast for global growth this year from 2.7 per cent to 2.3 per cent, following a similar reduction by the International Monetary Fund.
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Brende told AFP it was still too soon to predict the impact of Trump's swingeing tariffs.
It is 'too early to say what these tariffs will end with because the negotiations are still ongoing', he said.
'I think the jury is still out, but the traditional globalisation we saw is now changed into a different system,' he said.
'That is a new chapter... especially since trade was the engine of growth.'
Brende also warned mounting conflict could have a 'very negative impact' on global growth.
The WEF gathering in Tianjin comes at an uncertain juncture for the Chinese economy, which has struggled under a years-long property sector crisis and sluggish domestic spending.
'China really does matter,' Brende said, adding he expects the country to account for almost 30 per cent of global growth this year.
'China is pivoting its economy more towards digital trade, towards services and also now opening up for increasing domestic consumption – something that is important,' Brende said.
Officials in Beijing have since late last year unveiled a string of aggressive measures including key rate cuts and cancellations of home purchasing restrictions.
But many economists remain sceptical that the Chinese economy can achieve the government's official growth target for this year of around five per cent.
With the tumultuous trade war threatening shipments from the manufacturing powerhouse, Beijing is looking to emerging technologies such as artificial intelligence as potential sources of future growth.
'In the past, trade was the driver of growth, but you cannot exclude that new technologies including AI can... maybe replace the important role that trade had', Brende told AFP.
While trade will remain 'very important', he said, disruptive technologies can provide the productivity boost needed to 'avoid a decade of sluggish growth'.
Attendees bustled around a cavernous conference hall in Tianjin on Tuesday ahead of talks with a lineup of speakers that includes former UK Prime Minister Tony Blair.
Chinese Premier Li Qiang is expected to deliver a keynote speech on Wednesday. AFP
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CNA
36 minutes ago
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'Not happy': Trump accuses Israel, Iran of breaching truce
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Israeli Defence Minister Israel Katz earlier said he had ordered the military to strike Tehran in response to what he said were missiles fired by Iran in a violation of the ceasefire announced hours earlier by Trump. The minister said in a statement he had ordered the military to "continue high-intensity operations targeting regime assets and terror infrastructure in Tehran" in light of "Iran's blatant violation of the ceasefire declared by the President of the US". Iran denied violating the ceasefire. The armed forces general staff denied that there had been any launch of missiles towards Israel in recent hours, Iran's Nour News reported. Both Israel and Iran had confirmed the ceasefire after Trump's announcement. Israeli Prime Minister Benjamin Netanyahu said his country had achieved the goals it set in launching its Jun 13 surprise attack on Iran - to destroy its nuclear programme and missile capabilities. 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GLOBAL RELIEF Despite the early threats to the ceasefire, the response across the region and wider world was largely one of relief at the prospect of an end to the biggest direct confrontation ever between the two foes. Global stock markets surged and oil prices tumbled after the ceasefire announcement, in the hope it heralded a resolution of the war two days after the US hit Iranian nuclear sites with huge bunker-busting bombs. "We're happy, very happy. Who mediated or how it happened doesn't matter. The war is over. It never should have started in the first place," said Reza Sharifi, 38, heading back to Tehran from Rasht on the Caspian Sea, where he had relocated with his family to escape strikes on the capital. "I was so worried that Iran would end up like Syria or Iraq," said Maryam, 41, who stayed in Tehran because her family had no money to travel. "I want my two children to grow up in peace. I want them to live their childhood happily." Israel attacked on Jun 13, hitting Iranian nuclear sites and killing the top echelon of its military command in the worst threat faced by the Islamic Republic since war with Iraq in the 1980s. During the campaign, Israel said it was prepared to topple Iran's clerical rulers if necessary to achieve its aims and struck symbolic targets unrelated to the military, culminating on Monday with a strike on Tehran's Evin prison. Iranian officials say hundreds of people have been killed in airstrikes. Full information about the extent of the damage cannot be confirmed independently, with media tightly controlled. Iran's retaliatory missile strikes killed 28 people in Israel, the first time large numbers of Iranian missiles have penetrated its defences. Trump entered the war on Saturday with strikes on Iranian nuclear sites buried under a mountain using huge bombs that Israel does not possess. 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Straits Times
41 minutes ago
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Singapore shares rise on Israel-Iran ceasefire and Wall St rally; STI up 0.7%
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Business Times
an hour ago
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So much for the US dollar's safe-haven rally; de-dollarisation still has some teeth: analysts
[SINGAPORE] The US dollar's recent bout of strength – a short-lived one – amid rising Israel-Iran tension signals that the greenback's safe-haven status is intact. But its swift slide on news of a ceasefire on Tuesday (Jun 24) also suggests that the de-dollarisation narrative is still in play, said analysts. Deutsche Bank's global head of emerging markets and Asia-Pacific research, Sameer Goel, told The Business Times: 'The price action last week, including in Asian currencies, in response to geopolitical risk in the Middle East supports the more traditional safe-haven appeal of the dollar. 'But I don't think that reverses the de-risking trend in global markets to re-calibrate their unhedged exposure to the dollar,' he said. Goel said that two concurrent dynamics are underway in markets: One is a more cyclical de-risking from the unhedged concentrated exposure to the US dollar; the second is a slower, but more structural de-dollarisation trend, in line with shifts in global trade and payment systems. The de-risking relates more to the reduced appeal of growth/rates/fiscal exceptionalism that has underpinned the greenback's outperformance in the last few years. It is also about finding the appropriate price – the value of the US dollar and/or yields – to continue funding the US' large twin deficits, he said. The economist added that de-dollarisation is more about growing alternative non-dollar pools of liquidity to fund global trade and capital market transactions. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up MUFG Bank's senior currency analyst, Michael Wan, agreed that the shift to rebalance away from the US dollar was intact despite 'some speed bumps or detours, and beyond week-to-week market gyrations'. 'The gravitational pull is still there,' he concluded, noting that key drivers for Asian economies include significant existing overweights in US assets, greater supply-chain fragmentations, and longer-term fiscal concerns in the world's largest economy. A refuge, no less That said, Julius Baer economist David Meier maintained that US dollar weakness since the beginning of the year is not necessarily at odds with its safe-haven characteristics. 'A country's reserve currency status is built on a combination of preconditions, including a large, stable economy, institutional strength/warranting of property rights, deep financial markets and is protected by military strength – all of which remain intact in the US,' he said. 'Although erratic policymaking is casting doubts on its institutional strength, as long as property rights remain warranted, the safe-haven character of the US dollar should hold.' Moody's Analytics director and head of Asia-Pacific Economics, Katrina Ell, agreed that the greenback was still an attractive haven asset. She noted that recent heightened uncertainty due to the US' 'chaotic protectionist stance' had driven its assets to be less attractive as it was the source of the instability; then escalated Middle East tensions once again sent investors back to the greenback. Currency moves The US dollar index over the weekend crept up towards the key 100 threshold – a level last hit in late May – after US President Donald Trump's posted on Truth Social on Sunday (Jun 22, Asian time) about the 'very successful air strikes' on three Iranian nuclear sites. The American currency reversed its trajectory late Monday evening, weakening after the US Federal Reserve governor teased an interest rate cut at the next policy meeting in July. It sank further Tuesday morning to around the 98 level as Trump announced a 'complete and total' ceasefire between Israel and Iran. In response, major East Asian and South-east Asian currencies – which have mostly logged year-to-date gains against the US dollar – first weakened over the weekend, and then reversed their losses at the start of the week. The won, ringgit and the Philippine peso recorded some of the largest movements against the greenback. Julius Baer's Meier said that the earlier underperformance can be attributed to their 'higher cyclicality and greater sensitivity to risk aversion', which he noted as greater than the Asian safe-haven Singapore dollar or the Chinese yuan renminbi offshore's policy-driven stability. Litmus tests On the psychological levels of the US dollar index he is watching in the near- to medium-term, which could signal a continuation of the safe-haven rally versus a reassertion of the de-dollarisation narrative, Meier flagged 97 as the most recent support level, and 99 as the resistance level. But he cautioned that defining levels is more in the realm of technical analysis than fundamental analysis. MUFG Bank's Wan noted: 'In the very near term, I'm looking for the 99.415 level at the 50-day moving average for the US dollar index to hold for the next downtrend.' If the greenback's safe-haven rally still has legs, the analyst expects its strength to be accompanied by a rally in US treasuries and/or equities. 'Conversely, if the de-dollarisation narrative is re-asserting itself, I would expect dollar weakness to be combined with bond markets outside the US doing better than the US, US equities lagging the rest of the world, and/or alternative safe havens (whether perceived or otherwise) such as gold, bitcoin, yen, franc and perhaps even the Singapore dollar, to do well.' Policy pivot or pause? On the Fed's and regional central banks' next moves, analysts are divided. Moody's Analytics' Ell cautioned that the threat of widespread tariffs remains a dark cloud, which means a sustained energy price increase would be a body blow. 'If this conflict keeps upward pressure on energy prices, the expectation that global inflation will stay contained should be abandoned,' she said. Julius Baer's Meier acknowledged that higher oil prices may exacerbate upside inflation risks, but maintained that the house anticipates only a temporary spike in oil prices. 'We do not expect the conflict to escalate to the point of closing the Strait of Hormuz, leading to a significant oil crisis, (hence) the impact on inflation is likely to remain within limits,' he said. 'Consequently, we do not expect this conflict to be a factor that would delay further monetary policy easing by the Fed or other global central banks,' added Meier. Deutsche Bank's Goel noted that the increasing signs of difference in opinion within the Federal Open Market Committee on whether the central bank should stay on the sidelines in the face of elevated uncertainty, or act more imminently to ease rates. He said: 'A weaker dollar, meanwhile, together with reduction in geopolitical tail risk as it relates to a supply-side shock to oil prices, should give more comfort and space for Asian central banks to ease monetary policy.'
