Did COVID and the war in Ukraine mark the death of globalization or its transformation? At the Davos Forum, the questioning is profound, just as the global economy is slowing down.
Historically advocated by anti-globalization movements, far from the hushed salons of the Forum, “de-globalization” has come back in force in the face of the profound disorganization of production chains linked to the war in Ukraine and the confinements in China.
“The price to pay or the time to wait are no longer compatible with our industry,” said Loïc Tassel, president for Europe of the American consumer goods group Procter & Gamble, during a conference on Monday. citing the example of the disruptions in the port of Shanghai. “We are now introducing the costs and resilience of production chains into the equation. It was far from our mind three years ago”, he continued, believing that “globalization is taking a break”.
The city of Shanghai is the symbol of the extreme tension on supply chains, which have had to deal for weeks with the closure of factories and the saturation of its port. The Chinese “zero COVID” strategy greatly extends delivery times for companies. Added to this is the war in Ukraine and the severe disruptions affecting the prices and supply of energy and agricultural raw materials, which threatens to lead to famines in certain fragile countries.
Rather than “de-globalisation”, Pamela Coke-Hamilton, director of the International Trade Centre, an agency based in Geneva, prefers to speak of diversification and relocation to closer and less conflictual areas.
The cheapest
However, “reglobalization” comes up against the very way in which globalization has gradually shaped itself on the planet: most of the time towards the least expensive, at the cost of massive dependence on certain regions.
“We have never imported as much from China as since we said that we had to depend on it less”, ironically launches Gilles Moëc, the chief economist of the Axa group, in the bays of Davos. “Besides, one of the reasons people are nervous right now is that if China were unable to meet global demand because of the pandemic, then it would be a disaster. »
Regarding the global economic panorama, “the horizon has darkened,” noted Monday the Managing Director of the International Monetary Fund, Kristalina Georgieva, in Davos. And while the 3.6% global growth forecast for this year rules out a global recession, “that doesn’t mean it’s out of the question” among developed countries or for highly vulnerable countries. The clouds are already gathering in the developed areas, according to the OECD: growth was only 0.1% in the first quarter quarter on quarter, said this international organization on Monday, and a decline of 0, 1% was even recorded for the G7 countries.
In fact, one of the reasons people are nervous right now is that if China were unable to meet global demand because of the pandemic, then it would be a disaster.
The second quarter promises to be sluggish, with the war in Ukraine taking root and Chinese confinements increasing.
After spending lavishly during the pandemic, “the recipe to put in place is not obvious, and that worries everyone a little”, adds Gilles Moëc. This, especially since central banks, like that of the United States, are increasing their interest rates sharply in order to fight against high inflation, contrary to the potions chosen during the COVID crisis.
The European Central Bank is also set to exit negative rates despite a sharp downward revision last week of the Commission’s growth forecast for the year in the euro zone, from 4% to 2.7% .
Engine of the world economy, China is not to be outdone, revealing in recent days its worst economic performance in two years, with retail sales and industrial production at half mast in April, as well as unemployment close to its record.