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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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Why EY sees weaker 2023 outlook

Chancellor says UK ‘not immune’ from pressure

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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UK ‘could be in for first quarter contraction’

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%.

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Famine declared in Gaza City – and projected to expand to two other areas in the next month

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Famine declared in Gaza City - and projected to expand to two other areas in the next month

A famine has been declared in Gaza City and the surrounding neighbourhoods.

The Integrated Food Security Phase Classification (IPC) – a globally recognised system for classifying the severity of food insecurity and malnutrition – has confirmed just four famines since it was established in 2004.

These were in Somalia in 2011, and in Sudan in 2017, 2020, and 2024.

The confirmation of famine in Gaza City is the IPC’s first outside of Africa.

“After 22 months of relentless conflict, over half a million people in the Gaza Strip are facing catastrophic conditions characterised by starvation, destitution and death,” the report said, adding that more than a million other people face a severe level of food insecurity.

Israel Gaza map
Image:
Israel Gaza map

Over the next month conditions are also expected to worsen, with the famine projected to expand to Deir al-Balah and Khan Younis, the report said.

Nearly a third of the population (641,000 people) are expected to face catastrophic conditions while acute malnutrition is projected to continue getting worse rapidly.

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What is famine?

The IPC defines famine as a situation in which at least one in five households has an extreme lack of food and face starvation and destitution, resulting in extremely critical levels of acute malnutrition and death.

Famine is when an area has:

• More than 20% of households facing extreme food shortages

• More than 30% of children suffering from acute malnutrition

• A daily mortality rate that exceeds two per 10,000 people, or four per 10,000 children under five

Over the next year, the report said at least 132,000 children will suffer from acute malnutrition – double the organisation’s estimates from May 2024.

Israel says no famine in Gaza

Volker Turk, the UN Human Rights chief, said the famine is the direct result of actions taken by the Israeli government.

“It is a war crime to use starvation as method of warfare, and the resulting deaths may also amount to the war crime of wilful killing,” he said.

COGAT, the Israeli military agency that coordinates aid, has rejected the findings.

Israel accused of allowing famine to fester in Gaza

Tom Fletcher, speaking on behalf of the United Nations, did not mince his words.

Gaza was suffering from famine, the evidence was irrefutable and Israel had not just obstructed aid but had also used hunger as a weapon of war.

His anger seeped through every sentence, just as desperation is laced through the report from the Integrated Food Security Phase Classification (IPC).

Conditions are expected to worsen, it says, even though the Gaza Strip has been classified as a level 5 famine. There is no level 6.

But it took only moments for the Israeli government to respond in terms that were just as strident.

Read Adam Parsons’ analysis here.

Israel’s foreign ministry said there is no famine in Gaza: “Over 100,000 trucks of aid have entered Gaza since the start of the war, and in recent weeks a massive influx of aid has flooded the Strip with staple foods and caused a sharp decline in food prices, which have plummeted in the markets.”

Another UN chief made a desperate plea to Israel’s prime minister to declare a ceasefire in the wake of the famine announcement.

Tom Fletcher, UN under-secretary general for humanitarian affairs, said famine could have been prevented in the strip if there hadn’t been a “systematic obstruction” of aid deliveries.

“My ask, my plea, my demand to Prime Minister Netanyahu and anyone who can reach him. Enough. Ceasefire. Open the crossings, north and south, all of them,” he said.

The IPC had previously warned famine was imminent in parts of Gaza, but had stopped short of a formal declaration.

Palestinians struggle to get aid at a community kitchen in Gaza City. Pic: AP
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Palestinians struggle to get aid at a community kitchen in Gaza City. Pic: AP

The latest report on Gaza from the UN Office for the Coordination of Humanitarian Affairs (OCHA) says there were almost 13,000 new admissions of children for acute malnutrition recorded in July.

The latest numbers from the Gaza health ministry are 251 dead as a result of famine and malnutrition, including 108 children.

But Israel has previously accused Hamas of inflating these figures, saying that most of the children who died had pre-existing health conditions.

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Suspect arrested over Nord Stream attacks served in Ukraine’s army, Sky News understands

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Suspect arrested over Nord Stream attacks served in Ukraine's army, Sky News understands

The Ukrainian suspected of coordinating attacks on the Nord Stream pipelines had served in Ukraine’s Secret Service and in the Ukrainian Army’s special forces, Sky News understand. 

Serhii K., 49, was arrested in northern Italy on Thursday following the issuance of a European arrest warrant by German prosecutors.

It is not known whether he was still serving at the time of the pipeline attack in 2022 and Ukraine’s government has always denied any involvement in the explosions.

According to sources close to the case, the suspect has been found in a three-star bungalow hotel named La Pescaccia in San Clemente, in the province of Rimini.

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Man arrested over Nord Stream attacks

When military officers from Italy’s Carabinieri investigative and operational units raided his bedroom, he didn’t try to resist the arrest.

The hotel’s employees have been questioned, but no further evidence or any weapons were found, the sources added.

Serhii arrived on Italy’s Adriatic coast earlier this week, and the purpose of his trip was a holiday. He was found with his two children and his wife.

More on Italy

At least one of the four people within his family had a travel ticket issued in Poland. He crossed the Italian border with his car with a Ukrainian license plate last Tuesday.

He was travelling with his passport, and he used his real identity to check into the hotel, triggering an emergency alert on a police server, we have been told.

A satellite image shows gas from the Nord Stream pipeline bubbling up in the Baltic Sea. File pic: Roscosmos via Reuters
Image:
A satellite image shows gas from the Nord Stream pipeline bubbling up in the Baltic Sea. File pic: Roscosmos via Reuters

After the arrest, he was taken to the Rimini police station before being moved to a prison in Bologna, the regional capital, on Friday.

Deputy Bologna Prosecutor Licia Scagliarini has granted the German judicial authorities’ requests for Serhii’s surrender, but Sky News understands the man told the appeal court that he doesn’t consent to being handed over to Germany.

He also denied the charges and said he was in Ukraine during the Nord Stream sabotage. He added that he is currently in Italy for family reasons.

While leaving the court, he was seen making a typical Ukrainian nationalist ‘trident’ gesture to the reporters.

The next hearing is scheduled for 3 September, when the Bologna appeal court is set to decide whether Serhii will be extradited to Germany or not. He will remain in jail until then.

In Germany, he will face charges of collusion to cause an explosion, anti-constitutional sabotage and the destruction of structures.

German prosecutors believe he was part of a group of people who planted devices on the pipelines near the Danish island of Bornholm in September 2022.

Serhii and his accomplices are believed to have set off from Rostock on Germany’s north-eastern coast in a sailing yacht to carry out the attack.

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The explosions severely damaged three pipelines transporting gas from Russia to Europe. It represented a significant escalation in the Ukraine conflict and worsening of the continent’s energy supply crisis.

According to a US intelligence report leaked in 2023, a pro-Ukraine group was behind the attack. Yet, no group has ever claimed responsibility.

Spare pipes for the Nord Stream 2 gas pipeline. File pic: Reuters/Fabian Bimmer
Image:
Spare pipes for the Nord Stream 2 gas pipeline. File pic: Reuters/Fabian Bimmer

Sky News understands Genoa’s Prosecutor’s Office in northern Italy has requested their colleagues in Bologna to share the information related to Serhii.

Anti-terrorism prosecutors are investigating another alleged sabotage linked to the Russian shadow fleet oil tanker Seajewel, which sank off the port of Savona last February.

On Thursday, they asked an investigative police unit to figure out whether there is a link between that episode and the Nord Stream attacks.

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It’s been a confusing week – and Trump’s been made to look weak

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It's been a confusing week - and Trump's been made to look weak

It’s been a confusing week.

The Monday gathering of European leaders and Ukraine’s president with Donald Trump at the White House was highly significant.

Ukraine latest: Trump changes tack

The leaders went home buoyed by the knowledge that they’d finally convinced the American president not to abandon Europe. He had committed to provide American “security guarantees” to Ukraine.

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European leaders sit down with Trump for talks

The details were sketchy, and sketched out only a little more through the week (we got some noise about American air cover), but regardless, the presidential commitment represented a clear shift from months of isolationist rhetoric on Ukraine – “it’s Europe’s problem” and all the rest of it.

Yet it was always the case that, beyond that clear achievement for the Europeans, Russia would have a problem with it.

Trump’s envoy’s language last weekend – claiming that Putin had agreed to Europe providing “Article 5-like” guarantees for Ukraine, essentially providing it with a NATO-like collective security blanket – was baffling.

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Trump: No US troops on ground in Ukraine

Russia gives two fingers to the president

And throughout this week, Russia’s foreign minister Sergei Lavrov has repeatedly and predictably undermined the whole thing, pointing out that Russia would never accept any peace plan that involved any European or NATO troops in Ukraine.

“The presence of foreign troops in Ukraine is completely unacceptable for Russia,” he said yesterday, echoing similar statements stretching back years.

Remember that NATO’s “eastern encroachment” was the justification for Russia’s “special military operation” – the invasion of Ukraine – in the first place. All this makes Trump look rather weak.

It’s two fingers to the president, though interestingly, the Russian language has been carefully calibrated not to poke Trump but to mock European leaders instead. That’s telling.

Read more on Ukraine:
Trump risks ‘very big mistake’
NATO-like promise for Ukraine may be too good to be true
Europe tried to starve Putin’s war machine – it didn’t go as planned

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Europe ‘undermining’ Ukraine talks

The bilateral meeting (between Putin and Zelenskyy) hailed by Trump on Monday as agreed and close – “within two weeks” – looks decidedly doubtful.

Maybe that’s why he went along with Putin’s suggestion that there be a bilateral, not including Trump, first.

It’s easier for the American president to blame someone else if it’s not his meeting, and it doesn’t happen.

NATO defence chiefs met on Wednesday to discuss the details of how the security guarantees – the ones Russia won’t accept – will work.

European sources at the meeting have told me it was all a great success. And to the comments by Lavrov, a source said: “It’s not up to Lavrov to decide on security guarantees. Not up to the one doing the threatening to decide how to deter that threat!”

The argument goes that it’s not realistic for Russia to say from which countries Ukraine can and cannot host troops.

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Sky’s Mark Stone takes you inside Zelenskyy-Trump 2.0

Would Trump threaten force?

The problem is that if Europe and the White House want Russia to sign up to some sort of peace deal, then it would require agreement from all sides on the security arrangements.

The other way to get Russia to heel would be with an overwhelming threat of force. Something from Trump, like: “Vladimir – look what I did to Iran…”. But, of course, Iran isn’t a nuclear power.

Something else bothers me about all this. The core concept of a “security guarantee” is an ironclad obligation to defend Ukraine into the future.

Future guarantees would require treaties, not just a loose promise. I don’t see Trump’s America truly signing up to anything that obliges them to do anything.

A layered security guarantee which builds over time is an option, but from a Kremlin perspective, would probably only end up being a repeat of history and allow them another “justification” to push back.

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Image and reality don’t seem to match

Among Trump’s stream of social media posts this week was an image of him waving his finger at Putin in Alaska. It was one of the few non-effusive images from the summit.

He posted it next to an image of former president Richard Nixon confronting Soviet leader Nikita Khrushchev – an image that came to reflect American dominance over the Soviet Union.

Pic: Truth Social
Image:
Pic: Truth Social

That may be the image Trump wants to portray. But the events of the past week suggest image and reality just don’t match.

The past 24 hours in Ukraine have been among the most violent to date.

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