WEF President Warns Of Alarming Global Debt Levels Approaching Historic Highs: 'We Cannot Get Into A Trade War'

Borge Brende, the president of the World Economic Forum (WEF), expressed concerns about the global economy, warning of a potential decade of low growth due to soaring debt levels.

What Happened: Speaking at the WEF’s “Special Meeting on Global Collaboration, Growth and Energy for Development” in Riyadh, Saudi Arabia, Brende highlighted the alarming global debt ratios, which are nearing levels not seen since the 1820s, reported CNBC.

He underscored the risk of “stagflation” in advanced economies and cautioned against a potential trade war, emphasizing the need for continued global trade. Brende also urged governments to address the mounting debt situation, which is approaching 100% of the global GDP.

"We cannot get into a trade war, we still have to trade with each other," he explained when asked about avoiding a period of low growth.

Despite the current global growth estimate of around 3.2%, Brende warned that this is below the previous trend growth of 4% and could lead to a slowdown similar to that seen in the 1970s.

His warning aligns with a recent report from the International Monetary Fund (IMF), which noted that global public debt had risen to 93% of GDP last year, a figure that is still 9 percentage points higher than pre-pandemic levels. The IMF projected that global public debt could approach 100% of GDP by the end of the decade.

"There is so much unpredictability, and you can easily get out of control. If Israel and Iran escalated that conflict, we could have seen an oil price of $150 overnight. And that would of course be very damaging for the global economy," he said.

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Why It Matters: The warning from the WEF president comes at a time when the global economy is facing significant challenges. The U.S. economy is on the brink of potential stagflation, with experts warning of slow growth and rising inflation after the first-quarter GDP growth rate fell to 1.6%, lower than the expected 2.5%. This worrying combination of slower growth and rising inflation has reignited fears of stagflation.

These concerns are further compounded by the latest GDP and inflation figures, which have sparked concerns among investors, hinting at a potential economic downturn worse than a recession. The U.S. economy’s first-quarter growth, at an annualized rate of 1.6%, fell significantly short of the anticipated 2.5%, according to the Bureau of Economic Analysis.

Additionally, the U.S. economy could be on the brink of a recession, according to Lakshman Achuthan, co-founder of the Economic Cycle Research Institute (ECRI) and business-cycle expert. The ECRI's Leading Economic Index, known for its near-perfect track record, has been on a downward trend for the past year, indicating vulnerability to shocks.

These concerns have been further amplified by the Federal Reserve's recent decision to maintain high interest rates for an extended period. Despite the ongoing economic stability, the Fed's stance has raised concerns among investors and the general public.

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