A short list of wrong predictions at World Economic Forum

Olaf Scholz is the only G-7 leader to attend the World Economic Forum’s annual summit in Davos next week, with the German chancellor due to speak on the main stage for the second time since taking office in 2021.

Held under the tagline of “Cooperation in a Fragmented World” from Jan 16 to 20, South African President Cyril Ramaphosa, former US Secretary of State Henry Kissinger, World Health Organization Director General Tedros Ghebreyesus, UN Secretary General Antonio Guterres, and the actor Idris Elba are among the prominent participants.

Foreign Minister Bilawal Bhutto Zardari, accompanied by Minister of State Hina Rabbani Khar, will represent at the event to share the country’s perspective on economic and social impact of the evolving geopolitical realities, and challenges for the region’s security and stability.

He will highlight the developing world’s perspective on issues of climate change, food and energy security, and social vulnerabilities in times of high inflation, and slowing economic activity.

It’s an annual meeting where a global elite of business leaders, politicians and economists make bold predictions and try to set the agenda for the year ahead — but they don’t always get it right. CNBC listed some of these call made in recent years.

European recession

The fate of Europe’s economy was a big concern at May’s 2022 annual meeting, in the wake of Russia’s invasion of Ukraine.

Citigroup CEO Jane Fraser said at a panel, “I think much more concerning for Europe that is right in the middle of the storms from supply chains, from energy crisis, and just the proximity to some of the atrocities that are occurring in Ukraine.”

When asked whether there would be a recession in Europe, Fraser gave a definitive answer: “Yes — and I hope I’m wrong.”

Though the region’s growth rate has taken a hit and inflation has surged, the EU has so far escaped a recession. A number of analysts predict there will be one in early 2023, but expect it to be “mild”. Berenberg, for example, expects GDP (gross domestic product) to fall by 0.1 percent in the euro zone this year.

But Goldman Sachs has improved its outlook on the region, saying this week it no longer forecasts a recession for the euro area.

“We maintain our view that euro area growth will be weak over the winter months given the energy crisis but no longer look for a technical recession. This reflects more resilient growth momentum at the end of last year, sharply lower natural gas prices and earlier China reopening,” Goldman analysts said in the note.

They pointed to a GDP growth rate of 0.6 percent for 2023, compared to consensus expectations for a 0.1 percent contraction.

Germany is an example which saw its annual growth fall to 1.9 percent in 2022 down from 2.6 percent in 2021, according to data published by the federal statistics agency Destatis on Friday, but the country’s performance was much better than expected.

On the other hand, the growth rate of 1.9 percent — slightly higher than the 1.8 percent predicted by experts — was also higher than the average of just 1.0 percent in the ten years between 2011 and 2021.

These figures came as the government in Berlin had forecast in October that the Gross Domestic Product (GDP) would shrink to a meager 0.4 percent for the whole year amid soaring inflation and a desperate scramble to secure energy supplies as Germany weaned itself off Russian fossil fuels.

Nuclear war

Billionaire investor George Soros warned during a speech at Davos in 2018 that the United States could be heading for a nuclear war with North Korea.

“The United States is set on a course towards nuclear war by refusing to accept that [North] Korea has become a nuclear power,” he said at the time. And the Obama administration also said back in 2016 that this was a top national security risk.

So far, the United States has avoided any military conflict with North Korea. In fact, recent concerns along these lines are focused on Russia, in the wake of its invasion of Ukraine.

FTX crash

Cryptocurrency was rocky throughout 2022, but those in the market weren’t expecting the collapse of FTX — once a $32 billion crypto exchange.

Brett Harrison, who served as president of FTX US, told CNBC at Davos in 2022 that the company was in a “very good spot” regarding capital and was looking at acquisitions.

US authorities arrested Sam Bankman-Fried, the former CEO, in December, and accused him of wire fraud, securities fraud and money laundering. Bankman-Fried has pleaded not guilty.

Bitcoin goes to zero?

In 2019, Jeff Schumacher, founder of BCG Digital Ventures, said during a CNBC-hosted panel at Davos that the price of bitcoin could sink to zero.

Bitcoin has had a volatile run, but in 2021 and 2022 it reached levels well above those seen in 2019. It has since come down from its historic highs, but its trading levels this week are still above those of four years ago.

US-EU trade deal

At the 2020 WEF, then-German Finance Minister Olaf Scholz said he was confident that a trade deal between the United States and the European Union would be struck. Scholz, who’s now the country’s chancellor, said at the time: “In the end, we know that trade is most successful if there are not too many barriers.”

Both sides of the Atlantic have resolved some trade disputes since US President Joe Biden took office in 2021 – but they still seem far from a comprehensive trade deal.

In fact, European countries have raised concerns about Biden’s Inflation Reduction Act, arguing it discriminates against European companies and doesn’t follow international trade rules.

Credit Suisse reshuffle

Despite media reports in 2022 suggesting that Credit Suisse was considering replacing then-CEO Thomas Gottstein, when CNBC asked Credit Suisse chairman Axel Lehmann about it in Davos, he denied the reports.

“They didn’t speak to me and I know that has not taken place, so it is wrong,” he said. The Swiss bank announced in July that Thomas Gottstein was stepping down.


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