World economy entering ‘perilous phase’ with UK to perform worst in G7 this year, IMF says
The world economy is entering a “perilous phase” of low economic growth and high financial risk, the International Monetary Fund has warned in its latest set of assessments.
The IMF, which is holding its spring meetings in Washington this week, downgraded its outlook for global growth and said its medium term forecast for economic output was now at the weakest level since the fund began publishing these forecasts in 1990.
However its chief economist Pierre-Olivier Gourinchas added that there were also more severe risks in prospect.
He said: “We are… entering a perilous phase during which economic growth remains low by historical standards and financial risks have risen, yet inflation has not yet decisively turned the corner.”
“Below the surface,” he added, “turbulence is building, and the situation is quite fragile, as the recent bout of banking instability reminded us.
“Inflation is much stickier than anticipated even a few months ago. While global inflation has declined, that reflects mostly the sharp reversal in energy and food prices. But core inflation, excluding the volatile energy and food components, has not yet peaked in many countries.”
This cocktail of factors prompted the IMF to cut its forecast for global economic growth by 0.1 percentage points this year and next, to 2.8% and 3% respectively.
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Is Brexit to blame? The war in Ukraine? Ed Conway at the end of January taking a look at the IMF predicting the UK economy would end up behind advanced nations this year
However, the fund said that there was now a one-in-four chance of global growth falling below 2% this year, something tantamount to a global recession, and which has only happened five times since 1970 (most recently in 2009 and 2020).
The UK has received an upgrade to its economic growth forecast this year and next, but it is nonetheless forecast to be the worst performing economy in the G7 this year, shrinking by 0.3%. UK gross domestic product is slated to rise to 1% next year.
The fund’s warnings follow the collapse of Silicon Valley Bank in the US and Credit Suisse in Europe, episodes which have raised the prospect of further financial turbulence in the coming months, as the system responds to rising interest rates.
In the World Economic Outlook, Mr Gourinchas referred to the troubles in the UK pensions market following last September’s mini-budget, saying: “The financial instability last fall in the gilt market in the United Kingdom and the recent banking turbulence in the United States with the collapse of a few regional banks illustrate that significant vulnerabilities exist both among banks and non-bank financial institutions.
“In both cases the authorities took quick and strong action and have been able to contain the spread of the crisis so far. Yet the financial system may well be tested again.”
Yet alongside these immediate concerns, there is another worry haunting policymakers as they gather in Washington for this six-monthly set of meetings: that the global economy may have lost some of its mojo.
The decline in the long term global growth rate in this latest forecast is in part down to “benign” factors – among them the fact that countries like China, which have driven global growth for more than a decade, are becoming higher income nations, with an inherently slower growth rate.
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But the other worry they have is that the world is beginning to deglobalise, with many countries unravelling their supply chains and introducing new trade barriers.
Those barriers, which are rising faster than ever before, could constrict global productivity, implying weaker growth for the long run.
Responding to the IMF statement Chancellor Jeremy Hunt said:
“Thanks to the steps we have taken, the OBR [Office of Budget Responsibility] says the UK will avoid recession, and our IMF growth forecasts have been upgraded by more than any other G7 country.
“The IMF now say we are on the right track for economic growth. By sticking to the plan we will more than halve inflation this year, easing the pressure on everyone.”
Conservative Party leader Kemi Badenoch has called on Sir Keir Starmer to sack Treasury minister Tulip Siddiq over allegations she lived in properties linked to allies of her aunt, Sheikh Hasina, the deposed prime minister of Bangladesh.
It comes after the current Bangladeshi leader, Muhammad Yunus, said London properties used by Ms Siddiq should be investigated.
He told the Sunday Times the properties should be handed back to his government if they were acquired through “plain robbery”.
Tory leader Ms Badenoch said: “It’s time for Keir Starmer to sack Tulip Siddiq.
“He appointed his personal friend as anti-corruption minister and she is accused herself of corruption.
“Now the government of Bangladesh is raising serious concerns about her links to the regime of Sheikh Hasina.”
Ms Siddiq insists she has “done nothing wrong”.
Her aunt was ousted from office in August following an uprising against her 20-year leadership and fled to India.
Ms Siddiq is also named with her aunt in Bangladesh court documents about meetings with the Russian government.
Tory leader Kemi Badenoch has called on Sir Keir to sack the minister
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As economic secretary to the Treasury, Ms Siddiq is responsible for policy on both the City and tackling corruption.
She referred herself to the prime minister’s ethics watchdog on Monday following the reports about the properties.
On the same day, the prime minister said: “Tulip Siddiq has acted entirely properly by referring herself to the independent adviser, as she’s now done, and that’s why we brought into being the new code.
“It’s to allow ministers to ask the adviser to establish the facts, and yes, I’ve got confidence in her, and that’s the process that will now be happening.”
Police in Aberdeen have widened the search area for two sisters who disappeared four days ago in the city.
Eliza and Henrietta Huszti, both 32, were last seen on CCTV on Market Street after leaving their home on Tuesday at around 2.12am.
The sisters – who are part of a set of triplets and originally from Hungary – crossed the Victoria Bridge to the Torry area and turned right on to a footpath next to the River Dee.
Eliza and Henrietta Huszti were last seen on CCTV in Market Street. Pic: Police Scotland/PA
They headed in the direction of Aberdeen Boat Club but officers said there is no evidence to suggest the missing women left the immediate area.
Specialist search teams, police dogs and a marine unit have been trying to trace the pair.
The sisters crossed Victoria Bridge before walking along a footpath next to the River Dee
The pair were heading in the direction of Aberdeen Boat Club on the south side of the River Dee
Further searches are being carried out towards the Port of Aberdeen’s South Harbour and Duthie Park.
Police Scotland said it is liaising with authorities in Hungary to support the relatives of the two sisters.
Chief Inspector Darren Bruce said: “Eliza and Henrietta’s family are understandably extremely worried about them and we are working tirelessly to find them.
“We are seriously concerned about them and have significant resources dedicated to the inquiry.”
The sisters, from Aberdeen city centre, are described as slim with long brown hair.
Henrietta Huszti. Pic: Police Scotland
Eliza Huszti. Pic: Police Scotland
Officers have requested businesses in and around the South Esplanade and Menzies Road area to review their CCTV footage for the early morning of Tuesday 7 January.
Police added they are keen to hear from anyone with dashcam footage from that time.
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