At Davos, Mood Is Somber as Many CEOs Question Economic Outlook

The end of the free-money era has put a chill in the Swiss mountain air.

Business leaders and economists gathered here this week for the World Economic Forum’s annual event say they see the world buffeted by high interest rates that central banks have pushed through to combat inflation. That has created a threat of recession, and led some of the world’s biggest companies to hold their breath—and their spending—ahead of an uncertain year.

Yet some see reasons to think rising inflation, sparked in part by Russia’s invasion of Ukraine, has peaked. That could, as some business leaders hope, presage a soft economic landing. Alternatively, another rise in interest rates could lead to a more prolonged downturn.

Many businesses are cutting costsand in some cases jobs—to be prudent, several business leaders said. But a number are also holding out hope that they won’t need to cut too deeply to take advantage of what some expect could be a rebound this year if major economies skirt a recession.

“The mood is somber,” said Nick Studer, CEO of the Oliver Wyman Group consultancy, who has attended meetings in Davos for years. “At the same time, you’ve got a lot of people hoping that the U.S. and the U.K. environment—if it’s recessionary—is either short or shallow.”

Whether the U.S. dips into a recession this year remains an open question, many business leaders say. Executives have been preparing for the possibility for months, even as consumer spending has remained fairly strong and the unemployment rate stood at a historically low 3.5% in December.

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