Economy

The eurozone economy grew in the final quarter of 2022 despite economists’ predictions of a downturn, boosting hopes that the region will avoid a recession.Milder weather and government support cushioned the impact of soaring energy prices, helping the region’s economy expand by 0.1 per cent between the third and fourth quarter, according to official data published by Eurostat on Tuesday.The expansion was better than the 0.1 per cent drop forecast by economists polled by Reuters. The same survey had also predicted another quarter of contraction during the first three months of 2023. Bert Colijn, senior economist at ING, the bank, said the region’s economy was showing “incredible resilience” in the face of the energy crisis triggered by Russia’s invasion of Ukraine.Tuesday’s data means that the region managed to grow in each quarter of 2022 and by 3.5 per cent over the course of the year. John Leiper, chief investment officer at Titan Asset Management, said the figures were “quite an achievement” given the headwinds facing the region.Businesses and households also had to contend with higher borrowing costs, as the European Central Bank raised interest rates by 2.5 percentage points during the second half of last year to combat inflation that peaked at 10.6 per cent.Only a few months ago, economists had forecast a deep recession and energy shortages. But a less cold winter than feared, falling gas prices and generous government support have all helped avoid that scenario. Tuesday’s figures are likely to feature in the considerations of the ECB, which is seeking to ensure that inflation returns to its 2 per cent goal. Markets expect the ECB governing council to increase the benchmark deposit rate by 0.5 percentage points to 2.5 per cent when it meets on Thursday. The central bank’s resolve is also likely to be bolstered by the latest data on prices. French inflation accelerated in January while Spain’s core consumer price growth, which strips out food and energy, rose to the highest level on record.Earlier in the day, data showed France’s economy also managed to avoid falling into recession.The eurozone’s second-largest economy grew by 0.1 per cent between the third and fourth quarters, France’s national statistics bureau Insee said. The figure beat economists’ expectations of no change. Tullia Bucco, economist at UniCredit, said the French data was “encouraging news”. However, Charlotte de Montpellier, senior economist at ING, said this year would be “characterised by near-stagnation” of France’s economy.Germany reported a fourth-quarter contraction of 0.2 per cent on Monday, placing the eurozone’s largest economy on the brink of recession. Data published on Tuesday showed Italy’s economy also contracted, but by just 0.1 per cent — a smaller amount than feared. Spain’s economy expanded by 0.2 per cent, according to figures published last week. But detailed national data from France and Spain showed a sharp fall in imports, suggesting demand among businesses and households is weakening. Household consumption fell sharply in both countries, with Germany also reporting that private spending was the driver of the fall in GDP.The eurozone figure was also boosted by a strong performance by Ireland, which recorded growth of 3.5 per cent. The region’s GDP would have not grown without Ireland’s contribution. “The worst scenarios for this winter have been avoided,” Colijn said. “But the economy remains sluggish.” More

A surge in trade by Russia’s neighbors and allies hints at one reason its economy remains so resilient after sweeping sanctions.WASHINGTON — A strange thing happened with smartphones in Armenia last summer.Shipments from other parts of the world into the tiny former Soviet republic began to balloon to more than 10 times the value of phone imports in previous months. At the same time, Armenia recorded an explosion in its exports of smartphones to a beleaguered ally: Russia.The trend, which was repeated for washing machines, computer chips and other products in a handful of other Asian countries last year, provides evidence of some of the new lifelines that are keeping the Russian economy afloat. Recent data show surges in trade for some of Russia’s neighbors and allies, suggesting that countries like Turkey, China, Belarus, Kazakhstan and Kyrgyzstan are stepping in to provide Russia with many of the products that Western countries have tried to cut off as punishment for Moscow’s invasion of Ukraine.Those sanctions — which include restrictions on Russia’s largest banks along with limits on the sale of technology that its military could use — are blocking access to a variety of products. Reports regularly filter out of Russia about consumers frustrated by high-priced or shoddy goods, ranging from milk and household appliances to computer software and medication, said Maria Snegovaya, a senior fellow for Russia and Eurasia at the Center for Strategic and International Studies, in an event at the think tank this month.Even so, Russian trade appears to have largely bounced back to where it was before the invasion of Ukraine last February. Analysts estimate that Russia’s imports may have already recovered to prewar levels, or will soon do so, depending on their models.In part, that could be because many nations have found Russia hard to quit. Recent research showed that fewer than 9 percent of companies based in the European Union and Group of 7 nations had divested one of their Russian subsidiaries. And maritime tracking firms have seen a surge in activity by shipping fleets that may be helping Russia to export its energy, apparently bypassing Western restrictions on those sales.While Western countries have not banned the shipment of consumer products like cellphones and washing machines to Russia, other sweeping penalties were expected to clamp down on its economy. They include a cap on the price that Russia can charge for its oil as well as restricted access to semiconductors and other critical technology.Companies like H&M halted operations in Russia after the invasion of Ukraine, but the economy has proved resilient.Maxim Shipenkov/EPA, via ShutterstockSome companies, including H&M, IBM, Volkswagen and Maersk, halted operations in Russia after the invasion, citing moral and logistical reasons. But the Russian economy has proved surprisingly resilient, raising questions about the efficacy of the West’s sanctions. Countries have had difficulty reducing their reliance on Russia for energy and other basic commodities, and the Russian central bank has managed to prop up the value of the ruble and keep financial markets stable.On Monday, the International Monetary Fund said it now expected the Russian economy to grow 0.3 percent this year, a sharp improvement from its previous estimate of a 2.3 percent contraction.The I.M.F. also said it expected Russian crude oil export volume to stay relatively strong under the current price cap, and Russian trade to continue being redirected to countries that had not imposed sanctions.Most container ships have stopped ferrying goods like phones, washing machines and car parts into the port of St. Petersburg. Instead, such products are being carried on trucks or trains from Belarus, China and Kazakhstan. Fesco, the Russian transport operator, has added new ships and new ports of call to a route with Turkey that transports Russian industrial goods and foreign appliances and electronics between Novorossiysk and Istanbul.Sergey Aleksashenko, former deputy minister of finance of the Russian Federation, said at an event this month that 2023 would be “a difficult year” for the Russian economy, but that there would be “no catastrophe, no collapse.”Some parts of the Russian economy are struggling, he said, pointing to car factories that shut down after being unable to secure parts from Germany, France, Japan and South Korea. But military expenditures and higher energy prices helped prop it up last year.“We may not say that Russian economy is in tatters, that it is destroyed, that Putin lacks funds to continue his war,” Mr. Aleksashenko said, referring to President Vladimir V. Putin. “No, it’s not true.”Russia stopped publishing trade data after its invasion of Ukraine. But analysts and economists can still draw conclusions about its trade patterns by adding up the commerce that other countries report with Russia.The International Monetary Fund said it expected Russian crude oil exports to stay relatively strong despite a Western price cap. Andrey Rudakov/BloombergMatthew Klein, an economics writer and a co-author of “Trade Wars Are Class Wars,” is one of the people drawing conclusions about this Russia-size hole in the global economy. According to his calculations, the value of global exports to Russia in November was just 15 percent below a monthly preinvasion average.Global exports to Russia most likely fully recovered in December, though many countries have not yet issued their trade data for the month, he said.“Most of that recovery has been driven overall by China and Turkey particularly,” Mr. Klein said.It’s unclear how much of this trade violates sanctions imposed by the United States and Europe, but the patterns are “suspicious,” he said. “It would be consistent with the idea that there are ways of trying to get around some of the sanctions.”Silverado Policy Accelerator, a Washington nonprofit, recently issued a similar analysis, estimating that the value of Russian imports from the rest of the world had exceeded prewar levels by September.One of the case studies in that report was the jump in Armenian smartphone sales. Andrew S. David, the senior director of research and analysis at Silverado, said the trends reflected how supply chains had shifted to continue providing Russia with goods.Samsung and Apple, previously major suppliers of Russian cellphones, pulled out of the Russian market after the invasion. Exports of popular Chinese phone brands, like Xiaomi, Realme and Honor, also initially dipped as companies struggled to understand and cope with new restrictions on sending technology or making international payments to Russia.But after an “adjustment period,” Chinese brands started to take off in Russia, Mr. David said. Overall Chinese exports to Russia reached a record high in December, helping to offset a steep drop in trade with Europe. Apple and Samsung phones also appeared to begin to find their way back to Russia, rerouted through friendly neighboring countries.“Armenia is certainly not the only one,” Mr. David said. “There’s a lot coming through central western Asia, Turkey and the former Soviet republics.”Shipments to Russia of other products, like passenger vehicles, have also rebounded. And China has increased exports of semiconductors to Russia, though Russia’s total chip imports remain below prewar levels.President Vladimir V. Putin at a military training facility in Russia. Military expenditures and higher energy prices helped prop up the Russian economy last year.Pool photo by Mikhail KlimentyevOne major open question is how effectively the Western price cap will hold down Russia’s oil revenue this year.The cap allows Russia to sell its oil globally using Western maritime insurance and financing as long as the price does not exceed $60 per barrel. That limit, which is essentially an exception to Group of 7 sanctions, is designed to keep oil flowing on global markets while limiting the Russian government’s revenue from it.Some analysts have suggested that Russia is finding ways around the effort by using ships that do not rely on Western insurance or financing.Ami Daniel, the chief executive of Windward, a maritime data company, said he had seen hundreds of instances in which people from countries like the United Arab Emirates, India, China, Pakistan, Indonesia and Malaysia bought vessels to try to set up what appeared to be a non-Western trading framework for Russia.“Basically, Russia has been gearing up toward being able to trade outside of the rule of law,” he said.Mr. Daniel said his firm had also seen a sharp uptick in shipping practices that appeared to be Russian efforts to contravene Western sanctions. They include transfers of Russian oil between ships far out at sea, in international waters that are not under the jurisdiction of any country’s navy, and attempts by ships to mask their activities by turning off satellite trackers that log their location or transmitting fake coordinates.Much of this activity had been taking place in the mid-Atlantic Ocean. But after media coverage of suspicious practices in this region, the hub moved south, off the coast of West Africa, Mr. Daniel said.“They’re exploding,” he said of deceptive shipping practices. “It’s happening at an industrial scale.”So far, the oil price cap appears to be accomplishing its goal of reducing the price that Russia can charge while keeping global supplies flowing. But it remains to be seen whether this shadow fleet of ships is big enough to allow Russia to buy and sell oil outside the cap, said Ben Cahill, a senior fellow at the Center for Strategic and International Studies, during a January panel discussion.“If that fleet is big enough for Russia to really operate outside the reach” of the Group of 7 countries, the cap probably “won’t have the kind of leverage that policymakers wanted,” Mr. Cahill said. “I think we should know within a couple of months.”Alan Rappeport More

Demand for gold surged to its highest in more than a decade in 2022, fuelled by “colossal” central bank purchases that underscored the safe haven asset’s appeal during times of geopolitical upheaval.Annual gold demand increased 18 per cent last year to 4,741 tonnes, the largest amount since 2011, driven by a 55-year high in central bank purchases, according to the World Gold Council, an industry-backed group. Central banks hoovered up gold at a historic rate in the second half of the year, a move many analysts attribute to a desire to diversify reserves away from the dollar after the US froze Russia’s reserves denominated in the currency as part of its sanctions against Moscow. Retail investors also piled into the yellow metal in a bid to protect themselves from high inflation.Central bank purchases of gold hit 417 tonnes in the final three months of the year, roughly 12 times higher than the same quarter a year ago. It took the annual total to more than double of the previous year at 1,136 tonnes. Krishan Gopaul, senior analyst at the WGC, said “colossal” central bank buying is a “huge positive for the gold market”, even as the industry group predicted that it would be tough to match last year’s purchases because of a slow down in total reserve growth.“Since 2010 central banks have been net purchasers of gold following two decades of net sales. What we have seen recently in this environment is central banks have accelerated their purchases to a multi-decade high,” he said. He added that a lack of “counterparty risk” was a key attraction of the metal for central banks, compared with currencies under the control of foreign governments.Only about a quarter of the fourth-quarter central bank purchases were reported to the IMF. Reported purchases in 2022 were led by Turkey taking in almost 400 tonnes, China, which reported buying 62 tonnes in November and December, and Middle Eastern nations.Gold industry analysts widely believe the remainder is accounted for by central banks and government agencies in China, Russia and the Middle East, which can include sovereign wealth funds.James Steel, a veteran precious metals analyst at HSBC, said that “portfolio diversification is the main reason” for US dollar-laden central banks buying gold. He adds that “a key reason for choosing gold is that central banks are limited in what assets they can hold, and they may be reluctant to commit to other currencies”.Demand among retail investors for bar and coins also jumped to a nine-year high in 2022 above 1,200 tonnes with strong demand in Europe, Turkey and the Middle East offsetting weakness in China where buyers were housebound by Covid lockdowns.Gold prices slid from a record high last March above $2,000 to just above $1,600 per troy ounce in November as rising interest rates led to outflows from gold-backed exchange traded funds equivalent to $3bn over the year. Gold produces no yield, dulling its appeal to investors when interest rates on low-risk bonds climb.However, demand from central banks and retail investors helped prevent the yellow metal sliding further and set the stage for a powerful rally since November. In those three months, gold has jumped almost a fifth to $1,928 per troy ounce — its highest level in nine months — helped by the US Federal Reserve signalling that it would slow down the pace of rate hikes.The WGC expects a revival in gold demand from institutional investors this year as interest rates in main economies approach their peak, while falling inflation could damp demand for bars and coins.As a result of exceptional central bank buying and an expected return of inflows for gold-backed ETFs, UBS raised its year-end target for the precious metal to $2,100 per troy ounce, up from $1,850 previously. More

At the Burger King outlet in central Hobbs, New Mexico, a new sign has been plastered across the front window: “NOW HIRING: COOKS/CASHIERS APPLY WITHIN!” Similar notices proliferate across the city’s main shopping plaza: Pizza Hut, Little Caesars, T-Mobile, CVS, K-Mart, Quickcuts, and Neighborhood Barbershop are all advertising vacancies. A boom is under way in this dusty, sun-bleached desert town: 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.While other US oilfields are in decline, Permian production hit a record high last year as Russia’s invasion of Ukraine helped drive energy prices higher. At 5.6mn barrels a day the field now accounts for almost half of all the oil produced in the US, pumping more than many Opec countries. The state of New Mexico’s crude production last year eclipsed output from the entire country of Mexico. Unemployment in the US oil and gas industry slid from around 6 per cent a year ago to less than 2 per cent in December — the lowest in a decade, according to the Bureau of Labor Statistics. That stands in stark contrast to sectors of the economy buffeted by rising interest rates: tech companies have laid off almost 230,000 employees since the beginning of 2022, according to layoffs.fyi, which aggregates job cuts. Some 1,500 miles from Silicon Valley, the bustle in the Permian is palpable. Oil and gas producers deployed 350 drilling rigs in the region last week, up by about a fifth from the same time last year, according to data collected by Baker Hughes. Other jobs have followed, from truck drivers and mechanics to hotel cleaners and construction workers. “Business is booming,” said Bruce, a 19-year old employee at a Hobbs supermarket as he retrieved trolleys scattered about the plaza car park by the nightly influx of oilfield workers. “Work is at an all-time high . . . everybody’s looking for somebody”.Employers are competing for workers in Hobbs, New Mexico © Adria Malcolm/ReutersOutside Hobbs, oilfield traffic weaves down winding county roads with names such as Battle Axe and Oiler. Lorries laden with sand and gravel speed down highways, pick-up trucks haul trailers carrying shining new diggers; SUVs cart diesel engines and coils of piping.Their passengers are suddenly earning big money. Roughnecks in New Mexico can command rates of more than $27 an hour, according to consultants Rystad Energy, up from $18-20 a year ago. A commercial trucking licence alone is enough to bag a driver a salary of over $100,000 without so much as a high school diploma.“Most of the entry level jobs right now are anywhere from $15-20 an hour — and usually more towards the high end,” says Sam Cobb, mayor of Hobbs. “It is an excellent opportunity for people that are not from [privileged backgrounds]. Unless you’re an engineer, you don’t have to go to college to become an entry level worker in the oil and gas industry.”Lea County, in which Hobbs sits, now produces more oil than any other county in the US from wells operated by companies including the listed Devon Energy and EOG Resources. Surging production has increased tax receipts for New Mexico, historically a state with one of the highest poverty rates in the nation. The state budget has jumped from less than $6bn four years ago to almost $9.5bn this year, with boosts envisaged for education, housing, healthcare and infrastructure spending. “It’s been just spectacular,” says Cathrynn Brown, a Republican lawmaker in the New Mexico state House of Representatives. “It’s a boom for sure — but this is bigger . . . than anything we have seen before. It’s unprecedented.”New Mexico’s crude oil production has eclipsed output from the country of Mexico © Ernest Scheyder/ReutersHobbs has known booms — and busts — before. In the 1980s, when oil prices crashed to historic lows, cars in town bore bumper stickers that read, “Can the last person to leave turn the lights out?” The start of the pandemic in 2020 effectively halted oilfield activity as prices again collapsed, clobbering workers. Now the mood is different as experts forecast record global oil demand this year and crude prices stabilise around $80 a barrel. Plum salaries in the oilfields have drawn workers from traditional service jobs like retail and hospitality, leaving restaurants running at half capacity owing to a lack of staff. Others have jacked up wages in a bid to compete: Burger King is offering up to $28 an hour to flip burgers, a job that pays an average of $19 in high-cost New York. “Trying to recruit in oilfield jobs that’s hard enough. But recruitment in retail jobs is very difficult,” says Jennifer Grassham, who runs the Lea County economic development board. “I would say everyone is looking for people. It doesn’t matter whether it’s retail or oilfield.”Hotel rates are climbing, with rooms increasingly booked out in the middle of the week to accommodate visiting workers. Insignia Hospitality, which operates a portfolio of more than 20 hotels across the Permian, is opening a new Hilton franchise in Hobbs next month, its fourth location in the city. Rachel Overman, chief operating officer at Insignia, is optimistic. “Otherwise,” she said. “We wouldn’t be building a new hotel there.”Lea County’s unemployment rate sat at 3.7 per cent in November, roughly in line with the national average. Locals say the reality on the ground in the county of 73,000 people is an even tighter labour market. “There’s an unemployment number. But my personal opinion is I think those people are the ones that don’t want to work — because there are jobs,” says Dustin Armstrong, head of the local chamber of commerce. “We’re in the busiest spot in the busiest oilfield in the US.”The current upcycle comes despite fears that the shale revolution that made the US the world’s biggest oil and gas supplier is drawing to a close. Wall Street is demanding that profits be returned to shareholders rather than splurged on drilling binges. And in many parts of the country, the best acreage has already been drilled. Oil producers now complain about rampant cost inflation, another reason the US shale sector is on the whole struggling to increase oil supply as fast and easily as in the past. On top of this, the push to wean the world’s biggest economy off oil and gas in favour of cleaner alternatives is gaining pace. But in the Permian, there is confidence that America will continue to guzzle the hydrocarbons it produces for a long time to come. “We look at the whole energy mix dilemma from a different lens since we are in the business here,” says John Yates, chief executive of Abo Empire, a local producer. “The Permian Basin is more than 100 years old but that doesn’t render us to the pile of dinosaur bones.” More

The 10 per cent most polluting people in society are responsible for almost half of the annual greenhouse gas emissions behind climate change, creating a “strong incentive” for policies targeting the elite group, a UN-backed report has concluded.The sweeping research, by a group led by the Nobel Prize winning economist Thomas Piketty, examined the unequal effects of climate change and also found that the top 1 per cent of global emitters were responsible for nearly a quarter of the total growth in pollution between 1990 and 2019. “Carbon inequalities” within countries were now greater than those between countries, said the researchers from the Paris-based World Inequality Lab.The concentration of emissions created a “strong incentive for policies” targeting the most polluting individuals, such as wealth taxes, said the report, which was supported by the United Nations Development Programme. “All individuals contribute to emissions, but not in the same way . . . In addition to an obvious equity concern, there appears to be an efficiency question at stake,” the report said.Despite the increasing urgency of tackling climate change and the sequence of extreme weather events that devastated countries last year, global greenhouse gas emissions have remained stubbornly high. In October, the UN’s leading environmental body said national emissions reduction pledges put the world on track for warming of between 2.4C and 2.6C by 2100. The Paris Agreement binds the almost 200 signatory countries to strive to limit warming to 1.5C, ideally. Global inflation and a worsening cost of living crisis, meanwhile, has put the issue of growing inequality within countries front of mind in many places, including the UK and US. Sub-Saharan Africa was the only region where average per capita emissions presently “meet the 1.5C target,” the report found. The concentration of emissions among a small section of the global population also meant that ending global poverty was not incompatible with rapidly slashing emissions, it said.The so-called “carbon budgets”, or emissions limit, needed to bring everyone above the $5.50 per day poverty line were roughly equal to a third of the emissions from the top 10 per cent of people, the report estimated. The report looked at the emissions of individuals and factored the pollution from goods and services into the carbon footprints of the people who consumed them.

For there to be rapid change without harming the most vulnerable, a “profound transformation” of national and international tax regimes was required, the researchers said. For instance, a global “1.5 per cent” wealth tax on the world’s richest individuals could raise billions of dollars to help the most vulnerable groups shift to green energy, estimated at $175bn annually if implemented in the US and Europe, the report says.The removal of fossil fuel subsidies could also “free up considerable resources for more socially targeted adaptive measures,” though such changes needed to be paired with social reforms and assistance to protect the poorest from possible fuel price hikes, they said. A barrier to such measures was the lack of reliable data about the unequal distribution of emissions within and between countries, the researchers said. Policymakers should invest in better collection and understanding of such data to develop effective and targeted policies, they said. The effects of warming are also uneven, with low and middle income countries often more exposed and less able to cope with disasters, such as floods and fires, than the rich nations that bear a greater historic responsibility for climate change. More

The International Monetary Fund said the global economy will grow 2.9% this year.
This represents a 0.2 percentage point improvement from its previous forecast in October.
However, it said that revised number would still mean a fall from an expansion of 3.4% in 2022.
IMF calculations say that about 84% of nations will face lower headline inflation this year compared to 2022.

The IMF has revised its global economic outlook upwards.
Norberto Duarte | Afp | Getty Images

The International Monetary Fund on Monday revised upward its global growth projections for the year, but warned that higher interest rates and Russia’s invasion of Ukraine would likely still weigh on activity.
In its latest economic update, the IMF said the global economy will grow 2.9% this year — which represents a 0.2 percentage point improvement from its previous forecast in October. However, that number would still mean a fall from an expansion of 3.4% in 2022.

It also revised its projection for 2024 down to 3.1%.
“Growth will remain weak by historical standards, as the fight against inflation and Russia’s war in Ukraine weigh on activity,” Pierre-Olivier Gourinchas, director of the research department at the IMF, said in a blog post.

The outlook turned more positive on the global economy due to better-than-expected domestic factors in several countries, such as the United States.
“Economic growth proved surprisingly resilient in the third quarter of last year, with strong labor markets, robust household consumption and business investment, and better-than-expected adaptation to the energy crisis in Europe,” Gourinchas said, also noting that inflationary pressures have come down.
In addition, China announced the reopening of its economy after strict Covid lockdowns, which is expected to contribute to higher global growth. A weaker U.S. dollar has also brightened the prospects for emerging market countries that hold debt in foreign currency.

However, the picture isn’t totally positive. IMF Managing Director Kristalina Georgieva warned earlier this month that the economy was not as bad as some feared “but less bad doesn’t quite yet mean good.”
“We have to be cautious,” Georgieva said during a CNBC-moderated panel at the World Economic Forum in Davos, Switzerland.
The IMF on Monday warned of several factors that could deteriorate the outlook in the coming months. These included the fact that China’s Covid reopening could stall; inflation could remain high; Russia’s protracted invasion of Ukraine could shake energy and food costs even further; and markets could turn sour on worse-than-expected inflation prints.

IMF calculations say that about 84% of nations will face lower headline inflation this year compared to 2022, but they still forecast an annual average rate of 6.6% in 2023 and of 4.3% the following year.
As such, the Washington, D.C.-based institution said one of the main policy priorities is that central banks keep addressing the surge in consumer prices.
“Clear central bank communication and appropriate reactions to shifts in the data will help keep inflation expectations anchored and lessen wage and price pressures,” the IMF said in its latest report.
“Central banks’ balance sheets will need to be unwound carefully, amid market liquidity risks,” it added.

WATCH LIVEWATCH IN THE APP More

Global growth has proven “surprisingly resilient” and most countries will avoid a recession this year, the IMF said, as it upgraded its forecasts and hailed a possible turning point for the world economy.In estimates that took into account China’s decision to scrap its zero-Covid policy last month, the fund said it expected 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.That would mark a significant improvement on 2022, when the IMF estimates the global economy grew 1.9 per cent. The 3.2 per cent projected growth is also 0.5 percentage points higher than the IMF’s last forecast, in October. Pierre-Olivier Gourinchas, IMF chief economist, said 2023 “could well represent a turning point”, with economic conditions improving in subsequent years. “We are well away from any [sign of] global recession,” Gourinchas said, striking a sharp contrast with remarks by managing director Kristalina Georgieva this month that recession would hit more than a third of the global economy. The IMF said its improved outlook reflected the opening up of the Chinese economy and falling energy prices for Europe.It forecast that on average, the global economy would be 2.9 per cent bigger in 2023 than in 2022 — a different basis of calculation than the comparisons of the fourth quarters of this and last year. That is a step down from the 3.4 per cent pace estimated for 2022.But the IMF remained less optimistic than investors. With the MSCI World index of equities up 7 per cent since the start of the year and bond markets expecting interest rate cuts before 2024, traders have priced for a soft landing and pain-free reduction in inflation.The fund expects the UK to be the only leading economy to shrink in 2023, with GDP forecast to be 0.5 per cent smaller in the fourth quarter of the year than in the same period of 2022. Even Russia’s economy is likely to outpace the UK’s, according to its estimates, growing 1 per cent over the same period. Chinese growth, at 5.9 per cent, is forecast to be more than double the fund’s October estimate, while India is expected to be the world’s fastest-growing large economy this year, with output 7 per cent higher at the final quarter of 2023 than a year earlier. Together, China and India will account for half of global growth this year, while the US and euro area will account for just 10 per cent, the IMF said.China will be an “engine” that benefits other countries, Gourinchas said.The IMF warned, however, that it remained concerned about risks in China’s property sector. Beijing has been grappling with a real estate crisis since 2021, when developer Evergrande defaulted on its international debt.By the end of the year, the US economy is expected to be 1 per cent larger than a year earlier, unchanged from October’s forecast. But the IMF says the country’s 2022 performance was stronger than expected. Gourinchas said there was “a possibility” a US recession could be avoided but that this was a “narrow path”, adding that higher interest rates were “certainly going to cool off the economy and bring down inflation”. The US Federal Reserve is expected to raise rates by a quarter point this week, setting a target range of between 4.5 per cent and 4.75 per cent. Tobias Adrian, the director of the IMF’s monetary and capital markets department, warned that interest rates could rise more than markets expect and take longer to come down, particularly in the US.“There’s certainly a wedge in between what policymakers are communicating and what’s priced into markets,” he said. “There is still a lot of upside risk to inflation . . . Until it is very clear that inflation is coming down in a durable fashion . . . it is still necessary to continue to tighten monetary policy.”

The IMF also reiterated concerns about debt defaults in emerging markets but downplayed the risk of a “systemic debt crisis environment”.About 60 per cent of low-income countries and several emerging market economies are at risk of being or already are in distress, according to the fund.Asked about the revival of bailout talks with Pakistan, which had its growth outlook downgraded 2.5 percentage points to 2 per cent for this year, the IMF said it would focus on restoring domestic and external sustainability during a mission to Islamabad this week. More