UK economy to fare worse than any other country in developed world this year, IMF forecasts
Britain’s economic reputation has been dealt a further blow after the International Monetary Fund (IMF) forecast that this year the UK economy will fare worse than any other country in the developed world – including Russia.
In the latest update of its economic forecasts, the IMF said that it expected the UK’s gross domestic product (GDP) to contract by 0.6% in 2023.
To add further humiliation for the chancellor and prime minister, even as Britain’s outlook was downgraded, most other countries around the world saw their forecasts upgraded.
But the Fund said that while the broader global economy was doing better than expected, with inflation having peaked and investment beginning to turn around, the UK economy would face a downgrade “reflecting tighter fiscal and monetary policies and financial conditions and still-high energy retail prices weighing on household budgets.”
The UK had previously been forecast to grow by 0.3% this year and 0.6% next year.
Now, said the Fund, it should expect -0.6% this year and 0.9% growth in 2024.
The comments are especially awkward for the Treasury, which has been criticised by some for its plans to raise taxes and reduce the budget deficit in coming years, resulting in an increase in costs for businesses and households, even as they continue to battle a cost of living crisis.
Up until recently, chancellor Jeremy Hunt had contextualised the UK’s relatively weak growth by pointing to the fact that the IMF’s recent forecasts projected that a third of countries were facing a recession.
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However, the Fund has now upgraded its growth projections for Italy and Germany, with the result that both will now grow more than the UK in 2023.
Indeed, Britain’s -0.6% GDP is the worst of any economy included in its latest forecast update, including Russia – which despite facing sanctions from most of the West is projected to grow by 0.3%.
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Mr Hunt said of the forecast: “The governor of the Bank of England recently said that any UK recession this year is likely to be shallower than previously predicted, however these figures confirm we are not immune to the pressures hitting nearly all advanced economies.
“Short-term challenges should not obscure our long-term prospects – the UK outperformed many forecasts last year, and if we stick to our plan to halve inflation, the UK is still predicted to grow faster than Germany and Japan over the coming years.”
The IMF said it now expected the global economy to expand by 2.9% in 2023.
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Although this is down from the 3.4% in 2022, it is nonetheless 0.2 percentage points faster than the Fund previously forecast in October.
It said: “Adverse risks have moderated since the October 2022 [World Economic Outlook].
“On the upside, a stronger boost from pent-up demand in numerous economies or a faster fall in inflation are plausible.
“On the downside, severe health outcomes in China could hold back the recovery, Russia’s war in Ukraine could escalate, and tighter global financing conditions could worsen debt distress.”
After China’s decision to open up its economy and ditch its zero-COVID policy, the Fund upgraded its GDP projection from 4.4% to 5.2% this year.
It said the US would grow by 1.4%, rather than its previous projection of 1%.
Germany, which was previously forecast to shrink by 0.3%, is now slated to grow by 0.1%.
Donald Trump’s Middle East envoy has met Israel’s prime minister in an effort to secure a ceasefire deal in Gaza before the president-elect takes office on 20 January.
Benjamin Netanyahu’s office confirmed details of the meeting with Steve Witkoff on Saturday, adding that the head of the Israeli Mossad intelligence agency has been deployed to Qatar in order to “advance” talks.
It was not immediately clear when David Barnea would travel to Doha for the latest round of indirect discussions between Israel and Hamas.
Earlier on Saturday, an Israeli official said some progress had been made, mediated by Egypt, Qatar and the United States, to reach a deal in Gaza.
Ronen Bar (left), director of Israel’s security agency, and David Barnea (right), head of Mossad, at a ceremony marking the 7 October Hamas attack. File pic: Reuters
The mediators are making renewed efforts to halt fighting in Gaza and free the remaining Israeli hostages held there before Mr Trump takes office.
A deal would also involve the release of some Palestinian prisoners held in Israeli jails.
Families of Israeli hostages welcomed Mr Netanyahu’s decision to dispatch the officials, with the Hostages and Missing Families Forum Headquarters describing it as a “historic opportunity”.
Mr Witkoff arrived in Doha on Friday and met the Qatari Prime Minister Sheikh Mohammed bin Abdulrahman Al Thani, Qatar’s foreign ministry said.
Egyptian and Qatari mediators received reassurances from Mr Witkoff that the US would continue to work towards a fair deal to end the war soon, Egyptian security sources said, though no further details were released.
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Israel launched its assault on Gaza after Hamas fighters stormed across its borders in October 2023, killing 1,200 people and taking more than 250 hostages, according to Israeli figures.
Families of the roughly 100 hostages still held in Gaza are pressing Mr Netanyahu to reach a deal to bring their loved ones home.
Since then, more than 46,000 people have been killed in Gaza, according to Palestinian health officials, with much of the area destroyed and gripped by a humanitarian crisis, with most of its population displaced.
Pope Francis has been honoured with America’s highest civilian award by President Joe Biden, who has described the pontiff as “a light of faith, hope, and love that shines brightly across the world”.
It is the first time Mr Biden, 82, has given the Presidential Medal of Freedom with Distinction during his four years in office.
In a statement, the White House said the award is “presented to individuals who have made exemplary contributions to the prosperity, values, or security of the United States, world peace, or other significant societal, public or private endeavours”.
Mr Biden had been scheduled to present the medal to Pope Francis, 88, in person on Saturday in Rome on what was to be the final overseas trip of his presidency. But the president cancelled his visit to monitor the California wildfires.
The White House said Mr Biden bestowed the award during a phone call in which they also discussed efforts to promote peace and alleviate suffering around the world.
President Joe Biden presented Bono with the Presidential Medal of Freedom. Pic: AP
Denzel Washington was also recognised. Pic: AP
Michael J Fox was bestowed with the honour. Pic: AP
The award can be presented with or without distinction.
Mr Biden presented the medal of freedom – without distinction – on 5 January to several people including fellow Democrat Hillary Clinton, humanitarian and U2 singer Bono, fashion designer Ralph Lauren and actors Michael J Fox and Denzel Washington.
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Mr Biden himself is a recipient of the award with distinction, recognised when he was vice president by then president Barack Obama in a surprise ceremony eight years ago.
Barack Obama presented Joe Biden with the Presidential Medal of Freedom with Distinction in 2017. File pic: AP
The citation for the pope’s honour said his “mission of serving the poor has never ceased”.
“A loving pastor, he joyfully answers children’s questions about God. A challenging teacher, he commands us to fight for peace and protect the planet. A welcoming leader, he reaches out to different faiths,” it added.
Ukraine has captured two North Korean soldiers fighting in Russia’s Kursk region, President Volodymyr Zelenskyy has said.
The injured pair are now in Kyiv and communicating with the Security Service of Ukraine, the country’s domestic intelligence agency, he said.
Ukrainian special forces and paratroopers captured the North Koreans, Mr Zelenskyy said in a post on X.
“As with all prisoners of war, these two North Korean soldiers are receiving the necessary medical assistance,” he said.
“I have instructed the Security Service of Ukraine to grant journalists access to these prisoners.
“The world needs to know the truth about what is happening.”
Mr Zelenskyy said capturing the soldiers alive was “not easy”. He also claimed Russian and North Korean forces fighting in Kursk have tried to conceal the presence of North Korean soldiers, including by killing wounded comrades on the battlefield to avoid their capture and interrogation by Ukraine.
The post included images of the two men – one with a bandage around his jaw and the other around both hands and wrists – and what appeared to be a Russian military document.
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Ukraine’s security service SBU on Saturday provided further details.
It said one of those detained had no documents at all, while the other had been carrying a Russian military ID card in the name of a man from Tuva, a Russian region bordering Mongolia.
“The prisoners do not speak Ukrainian, English or Russian, so communication with them takes place through Korean translators in cooperation with South Korean intelligence,” a statement said.
One of the soldiers claimed he had been told he was going to Russia for training, rather than to fight against Ukraine, according to the SBU.
The agency added both men are being provided with medical care in line with the Geneva Conventions, and investigated “in cooperation with South Korean intelligence”.
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North Korean regular troops entered the war on Russia’s side in October, according to Ukraine and its Western allies.
US, South Korean and Ukrainian intelligence assessments suggest up to 12,000 North Korean combat troops have been sent by Pyongyang under a pact with Moscow.
They believe North Korea has also been supplying Russia with vast quantities of artillery shells.
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