DAVOS -- The global financial crisis is ending, but the post-crisis world situation will likely remain confused, according to participants at the World Economic Forum, which wrapped up Saturday in Davos, Switzerland.
The annual gathering opened on generally positive notes. Cautious optimism about the global outlook was a common sentiment, which is something that had not been felt so strongly at the forum for years. Many attendees were enthusiastic about economic recovery in the U.S., but many also voiced concern about the risk of emerging economies losing steam as well as political destabilization brought about by high unemployment rates and a widening socio-economic gaps in developed countries.
This year's meeting also showed a shift in attention away from emerging economies and back to developed countries in terms of their importance in the world economy.
U.S. Treasury Secretary Jack Lew said the U.S. economy was coming back and that the adverse effects of fiscal belt-tightening are fading and business sentiment is improving. He added that the U.S. will see 3% economic growth this year.
Japanese Prime Minister Shinzo Abe and the Bank of Japan Gov. Haruhiko Kuroda both stressed in their speeches that the Japanese economy is finally exiting from more than a decade of deflation.
Too early to tell
Europe's financial situation is still somewhat fragile. But, as European Central Bank President Mario Draghi said at the meeting, it has recovered enough that region has improved growth prospects.
On the other hand, the overall outlook for emerging economies was more cautious. New York University professor Nouriel Roubini, who more than five years ago predicted that the U.S. housing bubble would trigger a financial collapse, warned at Davos that the external environment surrounding rising nations is worsening, notably that the U.S. has begun scaling down its quantitative monetary easing and that the commodity price boom has ended. He said that nations with current-account deficits will become increasingly vulnerable.
Some business leaders, however, took issue with such pessimistic views. Nissan Motor President Carlos Ghosn said that the potential of emerging economies is far greater than that of industrialized nations. He added that businesses look 20 years or 30 years ahead when making investments and that short-term changes are less important.
Other experts were even pessimistic about the economic outlook for the developed world as well. Lawrence Summers, former U.S. treasury secretary, warned of potential economic stagnation in the U.S., and that this could halt corporate capital spending and keep unemployment up. Christine Lagarde, the managing director of the International Monetary Fund, pointed out the risk of Europe slipping into deflation.
Some concerns were also expressed about the international political situation. Prince Turki Al-Faisal, the former Saudi Arabian ambassador to the U.S., criticized U.S. President Barack Obama for deciding against military intervention in Syria. U.S. Senator John McCain warned that the world's trust in the U.S. is being undermined.
The strained relations between Japan and China were also discussed. There was also worry expressed over the effects of Europe's economic slump on May's elections for the European Parliament and that anti-immigration political parties could win more seats.
The Davos meeting has if anything underscored that the world, though nearly free of the financial crisis, is not secure by any means.