Business, government and civil society officials are expressing greater confidence in the world economy over the next 12 months. However, the Global Confidence Index also shows they believe the economy remains on very shaky ground.
The managing director of the World Economic Forum says the index is a bit more encouraging than the previous quarterly survey. However, Lee Howell says it’s nothing to celebrate.
“I think the Global Confidence Index, in terms of what you saw with the latest results, it’s good news, but it’s relative. Relative to really the great uncertainty and concern that were seen in the last quarter, which, as you know, if we look back in December and January, at the close of last year and the beginning of this year, lots of uncertainty. Particularly around what was happening in the Euro zone,” he said.
This includes the economic turmoil over Greece’s debt and debt concerns in other European countries as well.
Economic, political shocks
The index shows fear of a major economic disruption dropped from 63 percent of the respondents last quarter to 46 percent in the first quarter of this year.
“The survey clearly shows that people are less concerned about a major economic disruption in the next 12 months. However, and this is the big however, is that they’re more concerned about geopolitical shock. And it’s obvious that we live in a world where geopolitical shocks would absolutely impact the geoeconomic space,” Howell said.
Potential sources of geopolitical shock include Syria, Iran and North Korea.
“Unfortunately,” he said, We kind of live in a world where there are a number of places where this shock could come from at any given moment.”
Overall, Howell says the index does not indicate a return to cautious optimism. Instead, it’s more a feeling of being less alarmed.
There’s growing concern, he says, that the established economic, business and political systems that fared well in the 20th Century may not be up to the task in the 21st Century.
“We’re seeing at least in the industrialized world a real concern over structural issues, structural unemployment. And also an appreciation that the monetary and fiscal remedies that were put forth in the 70s and 80s and 90s have maybe run their limits in that fact that we’re dealing with a period of major structural change, economic level,” he said.
The index says there’s a perception of a lack of bold leadership around the world and an unwillingness to cooperate to solve common problems.
“What is missing is the efforts of particularly those who are in the leadership position sort of connecting the dots for the public and saying, if we do this and we handle this policy issue, it is going to impact this other issue. Or if we actually focus purely on this from a national context, we’re going to miss the big story because globally this is happening. I think we need a much more of a holistic and systematic approach and frame these issues for the public,” he said.
The next Global Confidence Index will be released in August. About 1200 international experts will be questioned about global economic and political issues.