Growth in emerging markets the key but shadow hangs over recovery

Business leaders at the World Economic Forum (WEF) said surging food prices could spark fresh social unrest and pointed to geopolitical worries over tensions between North and South Korea and Iran and Israel, as well as unrest in Egypt.

"I'm optimistic because the world is growing ... Now we are seeing a much more self-assured developing world going more its own way," Nestle chief executive Paul Bulcke told the organisers' opening news conference.

But other CEOs at the event struck a more cautious tone, pointing to the numerous risks which could yet derail the fragile global revival.

"Interest rates are zero today but they can only go up and higher interest rates will drive financing costs up as well," John Krenicki, chairman and chief executive of GE Energy and vice chairman of GE said. "It's not just inflation in energy but steel, copper and general commodities."

The four-day forum in the Swiss Alps will bring together at least 35 national leaders, including the presidents of Russia and France, and more than 1,400 business chiefs. The number of participants from India and China is bigger than ever.

Bankers are keen to show their industry emerging successfully from the wreckage of the global financial crisis and politicians want to dispel the gloom hanging over the euro zone. Growth in developing countries is key.

"This year, we think we'll see western Europe continuing to be tepid, America more U-shaped and the fast-growing emerging markets will continue to be V-shaped," Martin Sorrell, chief executive of the world's biggest advertising group WPP said.

Resurgent inflation, however, is stalking many developing economies.

Reports in China suggested new bank lending has surged in January, prompting fresh government measures to contain property price rises.

India raised interest rates on Tuesday, warning that higher food prices could become entrenched if steps to boost output are not taken.

Nor is the threat confined to the emerging world. inflation has exceeded targets and UK inflation could hit five per cent soon.