The British pound has fallen to its lowest level in decades against the US dollar, amid fears over runaway inflation and recession. The government has announced a drastic plan to cut taxes, claiming it will boost growth.

The Bank of England has warned that the UK economy may already be in recession, as it hikes interest rates for the seventh time to combat the spiralling pace of price rises. Inflation is still hovering nearly 40-year highs at just under 10 percent.

Economists often warn of the consequences of a recession; companies go bankrupt, and jobs are lost. But in forcing weaker firms out of business, a recession can leave more room for growth and recovery.

Kristalina Georgieva, the managing director of the International Monetary Fund, is warning that this year will be tougher than the last and that the war in Ukraine, rising inflation and higher interest rates will weigh heavily on the global economy. She expects the EU to be particularly hard hit, with half of its members seeing declines in growth.

The global economy is at an inflection point. The IMF projects that a third of the world economy will be in recession next year. War in Europe, a slowdown in China and soaring inflation have contributed to widespread pessimism around a growing, multifaceted economic crisis.

The EU's Economic Commissioner said the bloc had encouraging economic news and may avoid a much-feared deep recession in 2023.

Gloomy economic forecasts have cast a long shadow over this year's event in the Swiss Alps. But Georgieva said that although the IMF projects 2023 to be "a difficult year" and for growth to fall further, "we don't expect a global recession". She cited resilient labour markets and consumer spending, the post-Covid reopening of China and signs of inflation trending downwards.

The German economy is withstanding the aftershock of the Ukraine war better than prior projections showed.

The International Monetary Fund has given a brighter outlook in its latest report than in October, predicting that inflation will slow. It said that European economies had shown more resilience than expected.

Economic output grew by 0.1% in the last quarter of 2022 compared with the previous quarter, according to an early estimate.

The European Commission has revised its economic forecasts upwards slightly, predicting growth of almost 1% in the bloc for 2023. Inflation is expected to slow but remain high, a little more so outside the eurozone.

Germany will dodge a feared recession in 2023, according to a forecast by main German economic institutes. But they say inflation will remain high.