FirstFT: IMF forecasts global growth but UK recession

Global growth has proven “surprisingly resilient” and most countries will avoid a recession this year, the IMF said today, as it upgraded its forecasts and hailed a possible turning point for the world economy, while singling out Britain for a large downgrade.

The UK is expected to be the only leading economy to slide into recession this year, with the fund predicting a fall in household spending from high energy prices, rising mortgage costs and increased taxes.

The IMF now expects the global economy to grow 3.2 per cent between the end of the final quarter of 2022 and the end of the last quarter of this year, up significantly from last year and an upgrade from the fund’s last forecast in October. In contrast, the UK economy is expected to shrink by 0.5 per cent in the same period.

Pierre-Olivier Gourinchas, chief IMF economist, said the world was “well away from any [sign of] global recession”. But the UK could expect a “sharp correction” in 2023, and the country faced “a quite challenging environment”, he said.

The improved global outlook reflected not just the opening up of the Chinese economy, said the fund, but also an improvement in European prospects following the fall in energy prices.

Five more stories in the news

1. US halts Huawei export licences The Biden administration has stopped providing US companies with licences to export to Huawei as it moves towards imposing a total ban on the sale of American technology to the Chinese telecom equipment giant. US security officials believe the Shenzhen-based tech company helps China engage in espionage, which Huawei denies.

2. Goldman transferred Russian assets to former staff Goldman Sachs agreed a deal last year to transfer its privately held stakes in Russian recruitment firm HeadHunter and Cian, a property listing website, to two of the bank’s former employees. The move was part of the Wall Street firm’s efforts to wind down its operations in the country in the wake of Moscow’s war on Ukraine.

3. EU plans response to ‘toxic’ US green subsidies The EU is planning to hit back at the $369bn US climate bill by easing restrictions to allow a wave of tax credits for green investment. Some of the €800bn in its NextGenerationEU Covid-19 recovery fund could also be redirected towards tax credits, according to a draft plan seen by the Financial Times.

4. Twitter makes first $300mn interest payment after Musk buyout The company settled the quarterly interest payment on Friday with a group of seven lenders led by Morgan Stanley. The looming bill had been closely watched as the first big test of Musk’s financial stewardship of Twitter and as concerns about its financial health have mounted.

5. Renault and Nissan salvage alliance Renault and Nissan have hammered out a historic deal to salvage their troubled 24-year-old alliance and convince both sides that the partnership can survive without its former supremo, Carlos Ghosn. The carmakers have agreed to equalise their stake-holdings in each other, removing a source of tension that has dogged the relationship since its inception.

The day ahead

Adani share sale to close The Indian group’s controversial follow-on offering is set to close after allegations of fraud from short seller Hindenburg Research. Abu Dhabi’s International Holding Company has said it plans to invest $400mn.

Federal Reserve meeting The central bank is widely expected to slow its pace of interest rate increases when the Federal Open Market Committee meets today and tomorrow.

Economic data France, Italy and the EU release flash fourth-quarter gross domestic product figures, while Canada has November GDP data. Germany reports December retail sales and unemployment numbers, while the ECB publishes results from its bank lending survey.

Corporate results Caterpillar, ExxonMobil, Fujitsu, General Motors, McDonald’s, Mondelez, Pfizer, Snap, Spotify, UBS and UniCredit report.

Pope visits Congo Pope Francis visits the Democratic Republic of Congo, where about half the population is Catholic.

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What else we’re reading

Can the head of Britain’s civil service survive? Simon Case, Britain’s youngest cabinet secretary in recent times, is dealing with plunging morale in the civil service, with staff strikes and officials quitting over a row involving standards in public life. Now, some in the country’s mandarin class want him out, accusing him of being the ultimate “courtier” at the heart of a dysfunctional regime.

How the war in Ukraine met the culture wars Vladimir Putin is flirting with an important constituency in the west: cultural conservatives who are so disgusted by the alleged decadence of their own societies that they are attracted to Putin’s Russia, writes Gideon Rachman. The overlap is not a coincidence.

‘Hybrid identities’: Germany updates citizenship rules The German parliament is close to passing a new nationality law that will make it much easier for foreigners to acquire German citizenship. It is being seen as a small revolution in the country’s treatment of people with an immigrant background, and stands in sharp contrast to the trend in neighbouring countries.

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Opinion: The kids are alright after all When the pandemic hit, it was feared that young people entering the job market would suffer a shock that would reverberate through their careers, writes Sarah O’Connor. So far, that doesn’t appear to be true.

Jobs and wages boom in America’s busiest oilfield In the dusty, sun-bleached desert town of central Hobbs, New Mexico, joblessness is plunging, wages are soaring and new tax receipts are flowing to state coffers. Driving it all is a surge in crude oil production from the Permian Basin, a vast hydrocarbon trove that stretches across western Texas and south-eastern New Mexico.

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