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World Economic Forum Opens With Dire Global Markets Forecast - 2003-01-23

The World Economic Forum opened in the Swiss resort of Davos with dire forecasts about the impact a war on Iraq will have on world markets.

In his opening remarks to the World Economic Forum, founder of the annual gathering of elite political and financial figures, Klaus Schwab sounded a somber note.

"Never before in the 33-year-old history of the World Economic Forum, have we been in the situation where the world has been so fragile, so complex or so dangerous as this year," he said.

In a session dealing with the global economy, business leaders warned that a possible war against Iraq could jeopardize the already slim chances for financial recovery in the world's markets.

Financial analysts, like the forum's Peter Cornelius, say the business investment in the United States could possibly grow by 3.5 percent this year and that might help encourage global growth by about two percent. But he says a war against Iraq could hit American consumer and investor confidence in the long term.

"A short war in Iraq could actually lift some of the clouds currently hanging over the financial markets but a projected war in Iraq obviously will have negative consequences for the medium and longer outlook through various channels, not least oil prices," he said.

Analysts say if there is a major oil shock, its impacts are likely to be felt as much in 2004 as 2003. A poll of chief executives worldwide published by the consultancy PriceWaterhouseCoopers at the forum showed 48 percent of business leaders rated terrorism and global war as one of the biggest threats to their growth prospects.

Political observers like Indonesian analyst Dewi Anwar speaking during a forum session dealing with security, expressed concern about other effects a potential war in Iraq could have in Asia and other places.

"Every time there is a policy taken by the U.S. or some Western countries in the Middle East we worry how it will impact most Muslim societies because I think the more there seems to be an unpopular policy that targets Muslim countries in the Middle East, it impacts on our societies and leads to the radicalization of Islam," he said.

Although some 2,300 participants from more than 100 countries are discussing a variety of topics from corporate governance to global terrorism, worries over a possible U.S.-led war on Iraq are expected to dominate the six-day meeting.