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.
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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.
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.”
Joe Biden’s belated decision to allow Ukraine to use US-supplied, long-range missiles inside Russia will be cheered by Kyiv and will almost certainly prompt the UK to follow suit.
But the stunning shift in US policy – just weeks before Donald Trump takes over as US president – will also trigger fury and fresh threats from Moscow at a time of increasing uncertainty about the future course of its war.
President Vladimir Putin has warned the West they would be playing with fire if they allowed Ukrainian forces to launch Western-supplied cruise and ballistic missiles at Russia, saying it could even trigger a global conflict.
British and US officials, though, have repeatedly advised their respective capitals not to be intimidated by Moscow’s sabre rattling.
Yet there has been hesitancy, particularly in Washington, over the unleashing of US Army Tactical Missile System (ATACMS) ballistic missiles beyond the borders of Ukraine.
However, it seems that a move by North Korea to send thousands of its troops to fight with Russia has changed US calculations.
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The New York Times, which was among the US media organisations to break news of the Biden administration’s decision on long-range missiles, reported that the first time the American weapons will be used inside Russia will likely be against Russian and North Korean troops battling a Ukrainian incursion in the Russian region of Kursk.
While a significant step up in support for Ukraine, the ability to use American long-range missiles inside Russia is not a war-winning development.
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But it does expand Kyiv’s capacity to hit important military targets deliberately positioned by Russian commanders far back from the frontline. This includes stockpiles of missiles, drones and other ammunition used to strike Ukraine.
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Biden lifts ban on Russia strikes
Just as important as the military impact, though, is the political signal that the US decision sends to the Kremlin about Washington’s willingness to defy Russian warnings about dire consequences should Mr Biden dare to grant Ukraine the permission it’s so long been seeking.
The dramatic move by the United States comes after months of lobbying by Ukraine’s leader, Volodymyr Zelenskyy.
A key thing to watch now will be how Mr Putin reacts the first time an American missile kills Russian soldiers on Russian soil.
Moscow does not want a direct war with the United States and NATO – nuclear-armed forces with far greater combined firepower – but the Kremlin could well ramp up an already heightened campaign of sabotage and other forms of hybrid warfare across Europe.
Another important reaction to track will be how Mr Trump responds to Mr Biden’s move and whether he continues to allow Ukraine this permission once he takes over as the US commander-in-chief.
The president-elect has vowed to end Russia’s war in Ukraine quickly but he has not said how. Yet he has voiced fierce opposition to the continued gifting of vast quantities of American weapons to the Ukrainian military.
Moscow is focused on the “energy infrastructure throughout Ukraine” and is trying to intimidate Ukrainians with “cold and lack of light”, Mr Zelenskyy said.
The president added: “The whole world sees and knows that we are defending ourselves against absolute evil, which does not understand any language but force.
“We need unity [and] the world needs unity. Only together can we stop this evil.”
Two people were killed and a 17-year-old boy was injured after a Russian attack in the Black Sea port of Odesa, regional governor Oleh Kiper said.
Energy infrastructure was damaged, he said, leading to “interruptions in the supply of heat, water and electricity”.
In Mykolaiv, southern Ukraine, officials said two people were killed in a Russian drone attack.
Ukraine’s state emergency service said a multi-storey building, cars and a shopping centre were hit.
Two women were killed and six injured, including two children, it added.
In the central Dnipro region, two people died and three were wounded in a strike on a rail depot, while in Lviv, on the border with Poland, a woman was killed in a car.
In the capital, Kyiv, mayor Vitali Klitschko said Russian attacks had caused a fire to erupt on the roof of a residential building, injuring at least two people.
People took refuge in metro stations, while emergency services were pictured removing part of a Russian missile from an apartment block.
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The Ukrainian military said it had destroyed 102 missiles and 42 drones launched by Russia.
Hypersonic missiles were among the 120 fired at Ukrainian territory, it said.
Air defences were active in “almost all” regions of Ukraine.
Equipment at thermal power stations has been “seriously damaged” during Russian air strikes, Ukraine’s largest private energy provider said. DTEK said its staff were working on repairs.
Russia’s defence ministry confirmed it had attacked energy resources supporting Ukraine’s military-industrial complex, Russian news agencies reported.
Poland scrambled its air force early on Sunday because of the “massive attack by the Russian Federation using cruise missiles, ballistic missiles and unmanned aerial vehicles”.
Mr Zelenskyy sent his condolences to anyone affected by the latest Russian attacks.
He said “all necessary forces” were involved in restoring power and facilities.
On Tuesday, it will be 1,000 days since Russia launched what it calls its “special military operation”.
If you know a teacher, or you are a teacher, you’ll understand that many in the profession consider their jobs one of the best in the world, while also acknowledging it can be one of the most stressful.
Teaching in a war zone takes it to another level on both fronts.
But imagine teaching in a war zone in say the London Underground or the Paris or New York metros?
Well, that’s exactly what is happening in Kharkiv, Ukraine’s second largest city – a city attacked by Russia on a constant basis.
In 2023, the authorities banned children from being taught in regular school buildings here because of the threat they were under from missile strikes.
So Kharkiv city and its education department started working on a plan.
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That plan has concluded with the construction of six schools in six metro stations, teaching 4,800 children daily whose families haven’t fled the war.
Intrigued by this new educational experiment, as it’s still considered, we were told to meet at the University metro station in the centre of the city and wait to be taken to the school.
Soviet-era metro stations, and particularly the platforms, are universally grand and ornate, although Ukraine’s are slightly more modest.
Pedestrian walkways though are always crammed with florists, newspaper stands, mobile phone shops and cafes, and Kharkiv’s are no different.
What is different though is that next to the main platform entrance, an adjacent passageway has been sealed off by a white wall with three doors built into it.
We were ushered inside, past a guard and into a concourse with two desks.
In front of us, we could see a wide staircase leading to a long corridor. Above us, large, shiny silver metal tubes stretched into the distance, pumping in air from above ground.
Lining the corridor, we could see a series of white interconnecting cabins, all brightly lit, and from them, we could hear the sounds of children laughing, music, and teachers conducting class in this strange subterranean school.
Perhaps the only school in the world with one corridor.
A door to one of the classes opened, and in pairs, a class of six and seven-year-olds emerged – their teacher at the front and an assistant at the rear.
They’re heading to the bathroom for a toilet break, the staff must keep an eye on them.
If any of the children were to make it out of the school, they could easily get lost in the underground system.
The pupils are spread across seven classrooms with a mix of yellow and green desks and chairs, and walls decorated with bright pictures like rainbows, sunshine and sunflowers, to try to create a cheery atmosphere.
“At first, the children were bewildered by studying here, it felt unfamiliar to them, but interacting with each other and with their teachers helped them to adapt,” Iryna Tarasenko from Kharkiv’s education department told me.
Iryna is showing me around the school. They feel it’s their way of contributing to the war effort.
She said: “In the summer of 2023, the Defence Council didn’t permit children to study in regular school buildings, so, we had to find a solution. This is our frontline – our educational frontline.”
There are of course health concerns for both the teachers and the pupils spending so much time underground, so medical examinations are done on a regular basis.
It is an opportunity for doctors and behavioural specialists to monitor the effects of this war on them.
Dmytro Mitelyov is the neurologist on duty monitoring the children’s behaviour, checking for any signs of stress – physical and mental.
He gently asks each child how they’re feeling, and asks if they have any aches and pains.
“These are children who haven’t left Kharkiv since the war began, they live in a constant state of stress, multifaceted stress caused by a range of factors. They are exposed to things they see and hear, like alarms, explosions, and they feel it all,” Dmytro told me.
“When these children grow older, all the trauma they’ve endured during their formative years can, unfortunately, leave a lasting and serious imprint on their mental health. They haven’t had a healthy, carefree childhood – the kind where they can learn, play, and feel safe as children normally would.”
As the first group’s school day ends, children from one of Kharkiv’s most bombed districts, wrap up warm before being led to the surface to catch a school bus to their old school – which was hit by a missile.
It’s still where they meet their parents for normal pick-up.
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We jump on the bus with them for the journey past destroyed government buildings, shopping centres and restaurants.
When the air raid suddenly sounds, I look around to see how the children and teachers on this bus will react.
They barely flinch it’s so common.
“People have, to some extent, adapted,” one of the headmistresses, Olena Nikolienko, said.
“If we see missiles coming, heaven forbid, we’ll stop near a designated shelter, following our evacuation plan, and that’s where the children will go for cover.”
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Remember, these children are safe underground at school, up here they are not.
During the bus ride, 10-year-old Alisa began quietly sobbing. Her teacher told me her grandfather was killed four months ago on the frontline, and since then she has been prone to tears.
Alisa’s teacher comforted her and told her everything would be ok.
It feels like everyone here has to carry their own sadness.
Everyone.
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‘Ukraine war will end sooner under Trump’
Parents, standing in the first snowfall of the season, greet the children as they get off the bus.
The kids run off the bus, and start throwing snowballs at each other, enjoying this precious moment.