Vladimir Putin is profiting from the energy crisis as ballooning oil and gas prices prop up Russia’s economy while the war in Ukraine batters European nations.
The International Monetary Fund slashed its growth forecasts for almost every country as energy shortages, food costs, higher interest rates and China’s Covid lockdowns sap the economy to leave the world “teetering on the edge of a global recession”.
Britain is still expected to be one of the fastest growing rich countries this year, with GDP expanding by 3.2pc in 2022.
However, it is on course to be the weakest performer in the G7 next year with growth of just 0.5pc in 2023, less than half the 1.2pc expansion which the IMF had predicted back in April, as Britain suffers one of the highest inflation rates of any developed economy, peaking at 10.5pc later this year.
By contrast the IMF upgraded its predictions for Russia’s growth as the warmongering nation capitalises on its control of key energy supplies.
The IMF said: “Russia’s economy is estimated to have contracted during the second quarter by less than previously projected, with crude oil and non-energy exports holding up better than expected.
“In addition, domestic demand is also showing some resilience thanks to containment of the effect of the sanctions on the domestic financial sector and a lower-than-anticipated weakening of the labour market.”
Russia’s economy is expected to shrink by 6pc this year, marking a painful recession but one which is far less severe than the 8.5pc drop which was predicted in April.
The US economy is slowing sharply, from growth of 5.7pc last year to 2.3pc this year and 1pc next.
“A technical recession may already have started” in the world’s largest economy, the IMF said.
Similarly the eurozone is on track to grow by 2.6pc this year and 1.2pc in 2023, barely half the pace previously anticipated for next year.
“The war’s effects on major European economies have been more negative than expected, owing to higher energy prices as well as weaker consumer confidence and slower momentum in manufacturing resulting from persistent supply chain disruptions and rising input costs,” the IMF said, adding that there is a roughly one-in-four chance of Germany falling into recession.
China will grow 3.3pc this year — one quarter slower than previously estimated — and 4.6pc next year.
Pierre-Olivier Gourinchas, economic counsellor and director of research at the IMF, said: “The outlook has darkened significantly since April. The world may soon be teetering on the edge of a global recession, only two years after the last one.”
The situation in Europe risks worsening depending on Russia’s actions.
Even this gloomy forecast, with global growth slowing from 6.1pc in 2021 to 3.2pc this year and 2.9pc in 2023, assumes “no further unexpected reductions in flows of natural gas from Russia to the rest of Europe; that long-term inflation expectations remain stable; and no worsening of disorderly adjustments in global financial markets as a result of disinflationary monetary policy tightening.”
Tighter sanctions on Russia, the end of gas exports to Europe, more persistent inflation and turmoil in financial markets could all threaten to hit growth even harder, slowing the global economy to a crawl, the IMF warned.
Gas prices could triple, due to Russia’s dominance of the market, effectively wiping out the economic recovery in Europe.
Higher interest rates are needed to get inflation under control, the IMF said, while Governments should loosen the purse strings to help those suffering the most from higher costs.
