IMF chief reveals worries about private credit market keep her awake at night – business live

2.19pm BST IMF chief reveals worries about private credit market keep her awake at night The head of the IMF has revealed that worries about a crisis in the private credit market keeps her awake at night, sometimes. Kristalina Georgieva was asked at today’s press briefing whether she is concerned about the health of the private credit markets, following the collapse of US auto parts supplier First Brands and car dealership Tricolor in recent weeks. Those failures prompted the boss of JP Morgan, Jamie Dimon, to warn this week that more “cockroaches” could emerge from the private credit sector. Related: JP Morgan boss says more ‘cockroaches’ will emerge after private credit sector failures Q: Is this a concern for you about the health of the credit market – could it boil over into a crisis? How prepared is the world to cope with another crisis? Georgieva replies that the IMF is “concerned”, which it made clear in the financial stability report it issued this week. She says there has been a “very significant shift of financing” from the banking sector to non-bank financial institutions, to a point where more than half of financing is now there. Those non-bank financial institutions do not enjoy the same level of regulatory oversight as the banks do, creating a risk of ending up in “a difficult place” if the sector grows significantly. The scale of any problem depends on two things, she continues: 1) the performance of the real economy 2) “the magnitude of non-banking financial institutions that find themselves in a tough spot”. Georgieva declares: This is why we are urging more attention to the non-bank financial institutions. We are asking the question, what should be done to have more oversight and a better view of what is happening there. You are asking the question that keeps me awake every so often at night. Georgieva insists, though, tht the world is not in the situation it faced at the start of the global financial crisis – there are better policy frameworks across the globe, and systemically significant economies have accumulated massive reserves to cope with problems. But, she cautions that countries have exhausted their fiscal buffers, while central banks are still battling inflation. She adds, though, that there aren’t many ‘cockroaches’ scurrying around yet, telling reporters: In this environment, of course, the security blanket is covering us, but maybe we have a foot out in the cold. We have to be vigilant. What do we do? We watch it very carefully. Stretched valuations are a reality. AI has created this enthusiasm. If this bet pays off we are in a very good place, but what if it doesn’t or if it doesn’t fast enough? You are right to be putting this question to us. I can tell you that we are very watchful on developments. So far, so far, not that many cockroaches. Updated at 2.23pm BST 1.50pm BST Asked about the situation in Senegal, Kristalina Georgieva says she gives “full credit” to the Senegalise authorities for recognising that government debt levels had been misreported (by billions of dollars) “Debt was hidden, and they bought it to light,” she explains. Georgieva adds that she had a very constructive discussion with Senegal at the IMF, and is pleased that there is now clarity about the issue. 1.41pm BST Georgieva: China has reached a fork in the road Asked about China’s economy, Kristalina Georgieva says China is still expected to grow faster than the global average. She then says China faces “a fork in the road” – whether to continue with its old, export-oriented growth model, or focus to a more domestic-consumption driven economy. That means China must do three things Resolve problems in its real estate sector, which are hurting consumer confidence increase social safety nets, by redirecting money being used to subsidise industry open up markets that are less-open today, such as services, education and healthcare 1.35pm BST Georgieva: US, France, Italy, and Japan must tackle fiscal consolidation Q: How does the IMF view the fiscal health of the G7? And how about Canada specifically? IMF managing director Kristalina Georgieva says the build-up of debt is being driven primarily by advanced economies, and by emerging markets (so not low-income countries as it’s hard for them to tap more borrowing). Some of those advanced economies have more fiscal problems than others, she says. In one corner, we have the US, France, Italy, and Japan where there is need for fiscal consolidation, she explains, adding; “The good news is that they all recognise this need.” [however, France for example has faced massive political challenges in doing this…] On the other side, there are countries who are in a better position – Germany and Canada. says Georgieva, adding: “Both Germany and Canada recognise that in this very testing time they need to use their fiscal space.” She says that in the case of Germany, this extra spending is beneficial for Germany and the E union and the rest of the world. She also says the IMF very much welcomes the changes Canada is making, followinng the changes in their relationship with the US, including modernising the budget framework to split operating expenditive from investment. [Alas, Georgieva doesn’t say which bucket the UK falls into….] 1.27pm BST Kristalina Georgieva then asks those at today’s press briefing who use AI tools to raise their hands – and most of the attendees do! Updated at 1.27pm BST 1.25pm BST Georgieva: Countries must act fast to prepare for AI IMF managing director Kristalina Georgieva is now taking questions: Q: How big a role is the AI investment boom playing in the resilience of the global economy? “Excellent question”, replies Georgieva approvingly. She says the AI investment boom is bringing “incredibly optimism”, mainly concentrated in the US. Bu, she says, there are two things AI needs to work. First: energy, where AI’s demand is equivalent of half the energy consumption of the US. Second: How will AI transform the rest of the economy? It will only be valuable if it makes a major contribution to productivity and growth, Georgieva says. She adds: We have done our assessment. Or view at this point is that AI will indeed contribute to growth, somewhere beween 0.1% and 0.8% This is significant, Georgieva insists, as global growth is currently stuck at around 3%. If AI can contribute that extra growth it would be “very significant for the world”. But… the IMF is urging members to prepare for this AI revolution. Georgieva warns: The risk we see is that we may end up in a world where there is increased productivity, but it is also a source of divergence within countries and across countries. Preparedness really matters. It is happening fast, so we don’t really have much time as societies to be ready for AI. 1.16pm BST Georgieva: China should boost domestic demand, US should cut its deficit. IMF chief Kristalina Georgieva then explains that the main priority is to guard against financial instability. She says that countries with excessive surpluses like China should boost domestic demand, including by spending less on industrial policy and more on social safety nets. At the other end of the ledger, countries with excessive deficits such as the US need to reduce fiscal deficits and incentivize private savings. 1.16pm BST People are anxious, they are taking to the streets to demand better opportunities, IMF chief Kristalina Georgieva points out. She says the IMF is urging its members to keep trade as an engine of growth. 1.12pm BST IMF's Georgieva: Situation is better then feared, but worse than needed In the halls of the IMF’s headquarters, managing director Kristalina Georgieva is holding a briefing with the press now. Georgieva begins by reminding journalists that when policymakers gathered in Washington DC six months ago there was “a lot of anxiety about the state of the global economy”. Then, the IMF was forecasting a sharp slowdown (but not a recession). Six months on where do we stand? “Better then feared, but worse than needed,” Georgieva says. “Uncertainty has continued to go up, up, up” she warns, pointing towards the ceiling to emphasise the point. But despite this, global growth has held “fairly steady”. Growth is projected to slow from 3.3% last year to 3.2% this year and 3.1% in 2026. Georgieva says: “That’s better than we feared, and better than we projected six months ago.” She says there are two reasons. First, “improved policy fundamentals”. Since the financial crisis, many economies especially emerging markets have pursued sound policies, and strengthened their institutions and frameworks, Georgieva explains. “This investment is paying off – and if I may say, stay the course. Seconly, the private sector has shown “quite remarkable” agility in coping with challenges, such as in supply chain flexibility and front-loading imports to protect themselves from trade wars. Overall, Georgieva cautions that “the outlook is underwhelming”. Medium-term growth prospect remain weak, public debt near record highs and continues to climb, and the global economy is excessively imbalanced, she explains. 12.46pm BST Reeves: I'd like more budget headroom, but there are trade-offs The chancellor then confirmed that she would like to use the budget to build up more headroom against her fiscal rules - but stressed that this would be difficult, because it requires higher taxes or deeper spending cuts. She told UK journalists in Washington, D.C.: “If you’re asking me would I like more headroom, of course I would, but that comes with trade-offs.” Pointing to jittery bond markets, she said, “a greater buffer against that volatility would be helpful.” [Reminder, we reported last week that the chancellor was looking for extra headroom in the budget, to provide a larger cushion to keep within her fiscal rules] Related: Rachel Reeves looks for extra headroom in budget to insulate UK economy against bond market Updated at 12.46pm BST 12.43pm BST Reeves: Want to ensure Britain is a great place to do business Reeves was also asked whether she would levy new taxes on banks in the budget. In reply, she stressed the importance of maintaining a competitive environment, saying: “We want to make sure that Britain is a great place to do business and to bring in business. Financial services is one of our success stories in the UK.” Confronted with research from UK Finance suggesting UK banks are already more heavily taxed than their rivals, she did not demur. 12.40pm BST Reeves: those with the broadest shoulders should pay their fair share of taxes Over in Washington, Rachel Reeves is huddled with Britain’s top economics journalists on the sidelines of the Annual Meeting of the International Monetary Fund. My colleague Heather Stewart is there, and reports that the chancellor explained she was keen to “get the balance right” on taxing wealthier UK residents, as she hinted in yesterday’s Guardian interview she will do. Reeves said: “We have got to get the balance right and I do think if Britain is your home you should pay your taxes here.” The chancellor added: “I do think that those with the broadest shoulders should pay their fair share of taxes.” Related: Rachel Reeves says higher taxes on wealthy ‘part of the story’ for November budget 12.18pm BST NIESR predicts growth of 0.3% in Q3 Economic research group NIESR has cut its forecast for UK growth in the last quarter, following today’s GDP report. NIESR now expects GDP to grow by 0.3% in the third quarter – a downward revision from our previous forecast, followed by 0.4% in the fourth quarter of this year. They say August’s “disappointing monthly growth outturn” comes amid fragile demand conditions and continued uncertainty among businesses and households. #GDP grew by 0.3 per cent in the three months to August. This was driven by growth in #services, #construction, and #agriculture over the three-month period which offset falling production output.2/6— National Institute of Economic and Social Research (@NIESRorg) October 16, 2025 The #growth outturn for the month was unimpressive at 0.1 per cent, reflecting broad-based stagnation in services while positive growth in #production was partly offset by falling construction activity.3/6— National Institute of Economic and Social Research (@NIESRorg) October 16, 2025 We project 0.3 per cent #GDP growth for the third quarter – a downward revision which reflects the disappointing monthly outturn for August.4/6 pic.twitter.com/1rac1NfsmT— National Institute of Economic and Social Research (@NIESRorg) October 16, 2025 High-frequency indicators and survey data continue to point to subdued confidence among businesses and households. The #Budget is an opportunity for the government to restore confidence and quell uncertainty, for example by committing to a larger fiscal buffer.5/6— National Institute of Economic and Social Research (@NIESRorg) October 16, 2025 Otherwise, uncertainty and policy speculation will continue to drag on growth going into next year.Full story here ⬇️6/6 ENDS@RoyalEconSoc https://t.co/aykfKXOIon— National Institute of Economic and Social Research (@NIESRorg) October 16, 2025 11.22am BST TSMC, the world’s biggest producer of advanced chips, has raised its full-year revenue forecast on Thursday thanks to a bullish outlook for spending on artificial intelligence. TSMC said it expects robust artificial intelligence demand to continue, as it raised its 2025 revenue guidance to mid-30% growth in U.S. dollar terms from around 30%, and maintained its forecast for capital spending at up to $42 billion for 2025. The company also posted a record profit that blew past market estimates, which may calm some concerns that the AI sector is a bubble poised to burst. 10.47am BST Here’s an interactive chart showing how the UK economy has fared each month over the last two years: Interactive 10.44am BST Switzerland cuts growth forecasts as US tariffs bite The Swiss government has cut its 2026 economic growth forecast, due to the impact of US tariffs. Switzerland now expects economic growth of just 0.9% in 2026, below the 1.2% growth forecast in June, as Donald Trump’s tariffs put a burdens on Swiss exporters The State Secretariat for Economic Affairs says: “The additional tariffs are placing a heavy burden on affected sectors and export-oriented companies, with significant ripple effects expected across the broader economy.” Higher US #tariffs have further clouded the outlook for the #Swiss economy. Based on recently revised GDP data, Switzerland ’s Govt projects significantly below-average economic growth of 1.3% in 2025, slowing further to 0.9% in 2026 - chart @SECO_CH https://t.co/X8XvRUd4Sx pic.twitter.com/UBcymIq7ZZ— ACEMAXX ANALYTICS (@acemaxx) October 16, 2025 10.37am BST Nestlé to axe 16,000 jobs as new chief targets sales growth Grim news from Nestlé – it is planning to cut 16,000 jobs over the next two years as the owner of KitKat and Nescafé attempts to reduce costs and increase sales. The Swiss-headquartered multinational said the cuts would include 12,000 white-collar professionals and 4,000 in its manufacturing and supply chain, close to 6% of Nestlé’s global workforce. “The world is changing and Nestlé needs to change faster,” said Philipp Navratil, the new chief executive. “This will include making hard but necessary decisions to reduce headcount over the next two years. We will do this with respect and transparency.” Navratil, who replaced Laurent Freixe last month after he was fired for failing to disclose a romantic relationship with a subordinate, announced an acceleration of his predecessor’s cost-saving plan to free up cash. Related: Nestlé to axe 16,000 jobs as new chief targets sales growth 9.52am BST British lenders don’t expect a pick-up in demand for mortgages in the rest of this year. New Bank of England data shows that demand for mortgages is expected to remain unchanged in the last three months of 2025. The BoE’s quarterly Credit Conditions Survey also showed lenders expected overall demand for unsecured lending to be unchanged in the fourth quarter. No change: secured lending for house purchase remained consistent in Q3, while demand for remortgaging increased and is expected to rise again in Q4 as more borrowers run out of the once cheap borrowing line. pic.twitter.com/wCjKGog2oZ— Emma Fildes (@emmafildes) October 16, 2025 9.33am BST The UK stock market has made a slightly weak start to trading, with the FTSE 100 share index down 0.15% at 9409 points. Hotel chain Whitbread are leading the fallers, down 8% as the company behind the Premier Inn chain failed to impress the City with its latest results. Whitbread reported a 2% drop in revenues in the 26 weeks to 28 August 2025, and a 7% drop in adjusted profits due to “broadly flat UK total accommodation sales and positive momentum in Germany”. Chris Beauchamp, chief market analyst at IG, says Whitbread shares have fallen out of bed after this morning’s results, adding: “Investors had clearly expected better service from Whitbread, with the shares down sharply in early trading. However, it does look like a work in progress, with a steady shift to more profitable operations underway, but it seems that Whitbread might be at risk of overpromising and underdelivering, signalling it needs to manage its next few updates rather carefully”. 9.23am BST As well as downgrading UK GDP in July to a 0.1% fall, from 0% growth, the ONS has also trimmed its growth estimates for January-April: But there’s better news: Kallum Pickering, chief economist at UK investment bank Peel Hunt, has spotted that growth since the Covid-19 pandemic has been stronger than previously thought: The soap opera in UK data continues. Latest monthly GDP, which includes revisions to the series which goes back to 1997 shows GDP 5.5% above its Jan 2020 pre-COVID level, instead of 4.4%. Has far reaching positive implications for trend growth and productivity estimates… pic.twitter.com/1BjyK1rXkQ— Kallum Pickering (@KallumPickering) October 16, 2025 8.37am BST The pound has risen slightly this morning against the US dollar. Sterling is up 0.1% at $1.3414, away from the two-month low hit earlier this week. The dollar is generally a bit weaker, after US president Donald Trump said the US was locked in a trade war with China. 8.05am BST UK trade deficit widens as exports to US and EU fall Britain’s trade deficit has widened, partly due to a drop in exports to the European Union and the US. New trade data shows that UK exports to the United States fell by £700m in August, due to “falls in exports of machinery and transport equipment, chemicals and material manufactures.” Shipments to Europe also fell, with UK exports to the EU decreasing by £800m in August 2025, due to a £500m fall in exports of machinery and transport equipment, and a £200m fall in chemical exports. The Office for National Statistics explains: The fall in exports of machinery and transport equipment was because of reduced exports of both aircraft and mechanical power generators (intermediate) to Germany, while the decrease in exports of chemicals was because of reduced exports of medicinal and pharmaceutical products to Germany and Ireland. The total underlying trade deficit widened £1.7bn to £5.2bn in the three months to August 2025, with total exports falling by more than imports.Read more ➡️ https://t.co/Q3oiYWHREz pic.twitter.com/bFlKbg8vtn— Office for National Statistics (ONS) (@ONS) October 16, 2025 Kathleen Brooks, research director at XTB, says the UK is yet to benefit from the US trade deal agreed with much fanfare this year: The ONS also reported that the total underlying trade deficit widened in August to £5.2bn, up £1.7bn, led by a rise in imports from the EU. The UK’s favourable trade deal with the US is reaping no identifiable growth benefits as yet for the UK, the ONS reported that exports of goods to the US, including precious metals, was lower by £0.7bn. The trade deficit was down to trade in goods, where the deficit widened by £3bn in the three months to August, the trade in services surplus increased by £1.3bn in the same period. 7.40am BST Deutsche Bank: services and construction sectors have hit a pre-budget funk Britain’s services and construction sectors have been hit by a “pre-budget funk”, warns Sanjay Raja, Deutsche Bank’s chief UK economist, amid uncertainty about Rachel Reeves’s fiscal plans. Following today’s GDP report showing there was no services growth in August, while construction fell by 0.3%, Raja explains: Industrial production expanded by 0.4% m/m, led in large part by stronger manufacturing growth (0.7% m/m). The bad news? Both the services and construction sectors have hit a pre-Budget funk. The services economy was unchanged for a second consecutive month – this time, led by weaker transport and storage activity as well as weaker retail activity (particularly from lower new car registrations) and leisure services. And construction output shrunk by 0.3% m/m, dragged down by lower repairs and maintenance work to end the summer. Deutsche Bank now estimates growth in the third quarter of this year is tracking closer to 0.2% quarter-on-quarter - roughly half the pace pencilled in by the Bank of England. Raja adds: To be sure, the economy is now running at a lower gear after a strong start to the year…. We expect some turbulence to continue as we approach year-end. Indeed, the UK economy has yet to see the full ramifications of the US trade war. Budget uncertainty is hitting its peak too – likely dampening discretionary household and business spending. Updated at 7.47am BST 7.32am BST Economists: "dishearteningly meagre return to growth" as economy "stumbles" Economists are largely unimpressed by the modest growth of 0.1% recorded in the UK economy in August, and the 0.3% growth in June-August period. Lindsay James, investment strategist at wealth management firm Quilter, says the economy looks to be “stumbling to the end of the year”: “In the week that the International Monetary Fund gave the UK’s economic growth forecasts a small bump up, today’s GDP figures paint a picture of an economy stumbling to the end of the year after a strong start. Monthly GDP grew just 0.1%, giving a three-month rate of 0.3% - not exactly exciting figures. Markets will have been hoping for signs that the UK can maintain it’s early-year momentum but it appears that has now dissipated just as we approach a crunch Budget statement from the Chancellor. Rachel Reeves will need to find a tonic and quickly if she is to extricate the economy from its current malaise. “There are a number of obstacles coming down the track for the economy too. The IMF confirmed the UK has an inflation problem and is struggling to get out of it. That will continue to put pressure on the consumer. Meanwhile, both businesses and individuals are fearful of what is coming at November’s budget after Rachel Reeves confirmed tax rises are being looked at. Last year showed just how much impact that uncertainty can have on economic growth and now this year appears as if it will be no different. Suren Thiru, economics director at chartered accountancy group ICAEW, calls today’s growth figures ‘anaemic’: “This dishearteningly meagre return to growth will do little to allay fears over the wellbeing of the UK economy, with higher manufacturing output masking weaker activity in other sectors, notably services and construction. “August’s increase is unlikely to have triggered a noteworthy pickup in economic growth across the third quarter with higher inflation and free-falling business confidence expected to have restrained output in September. “November’s Budget is casting a long shadow over the UK economy with growing worries over more tax rises likely to prompt greater caution among consumers and businesses to spend and invest throughout the Autumn. “While a rate cut next month looks improbable, these anaemic figures mean it’s not quite a done deal as it gives those rate setters worried over economic conditions with more encouragement to vote to relax policy.” Ruth Gregory, deputy chief UK economist at Capital Economics, reckons there is little reason to think GDP growth will accelerate much from here, explaining: The meagre rise in real GDP in August suggests growth is still being hampered by high interest rates, higher taxes and soft overseas activity. With business sentiment on the floor and employment still falling, we doubt growth will improve much in Q4. Raj Badiani, economics director at S&P Global Market Intelligence, is similarly cautious: “UK economic growth is set to be muted in the next few quarters with private sector activity facing a damaging mix of external pressures, alongside increasing trepidation amid firms and consumers ahead of yet another difficult budget event. The latest short-term indicators suggest an end to the recent upward drift in the 2025 growth projection. “We expect UK real GDP growth to stand at 1.4% in 2025 and 1.0% in 2026. Despite persistent growth concerns, still-elevated earnings growth and the prospect of headline inflation rising to 4% in September are likely to rule out a further interest rate cut this year. The first-rate cut is expected to occur in February 2026 and the Bank rate to stand at 3.25% at the end of next year.” 7.22am BST The UK's consumer-facing services sector is struggling Today’s GDP report also highlights weakness at service sector firms focused on consumers. The UK’s consumer-facing services sector shrank by 0.6% in the three months to August, dragged down by: travel agency, tour operator and other reservation service and related activities (down 7.6%) other personal service activities (down 3.4%) buying and selling, renting and operating of own or leased real estate, excluding imputed rent (down 1.0%) 7.17am BST Treasury: for too many people our economy feels stuck Responding to today’s GDP report, a Treasury spokesman has conceded that the economy feels ‘stuck’, saying: “We have seen the fastest growth in the G7 since the start of the year, but for too many people our economy feels stuck. Working day in, day out without getting ahead. The Chancellor is determined to turn this around by helping businesses in every town and high street grow, investing in infrastructure and cutting red tape to get Britain building.” Earlier this week the IMF predicted the UK would be the second-fastest growing member of the G7 for 2025, following a relatively fast start to the year. 7.14am BST ONS: Some consumer facing services were weak Here’s ONS director of economic statistics Liz McKeown on today’s UK growth report: “Economic growth increased slightly in the latest three months. Services growth held steady, while there was a smaller drag from production than previously. “Continued strength in business rental and leasing and healthcare were the main contributors to services growth, partially offset by weakness in some consumer facing services, while wholesalers also fared poorly.” Today’s GDP report shows there was no growth in the UK services sector in August or July, but it did expand by 0.4% in the three months to August. 7.07am BST UK GDP: the key charts 7.04am BST Production grew, but construction shrank UK manufacturing drove growth in August. Today’s GDP report shows that production grew by 0.4% in the month, whereas services showed no growth and construction fell by 0.3% in August. 7.02am BST UK economy grew by 0.1% in August. Newsflash! The UK economy has returned to growth. UK GDP is estimated to have grown by 0.1% in August, new data from the Office for National Statistics shows. That will be a relief to chancellor Rachel Reeves. But there’s bad news too – the economy is now thought to have shrunk by 0.1% in July, revised down from the initial estimate of no growth. The ONS also reports that GDP grew by 0.3% in the three months to August 2025 compared with the three months to May 2025, a slight increase following growth of 0.2% in the three months to July 2025. Updated at 7.03am BST 6.49am BST Introduction: UK GDP report coming up... Good morning and welcome to our rolling coverage of business, the financial markets and the world economy. The UK economy is about to get its report card for August. The latest monthly GDP report is expected to show only modest growth, with economists predicting an expansion of just 0.1% in August. Although modest, that would be a small improvement on the previous month, as the economy flatlined in July. Any growth will be welcome news for the government as chancellor Rachel Reeves works on the autumn budget; yesterday, she told The Guardian that higher taxes on the UK’s wealthy will form part of next month’s fiscal update. Related: Rachel Reeves says higher taxes on wealthy ‘part of the story’ for November budget There are hopes that UK manufacturing may have picked up in August, as Michael Field, chief equity strategist at Morningstar, explains: “Manufacturing and industrial activity remain weak in the UK, with services doing a lot of the heavy lifting in terms of numbers thus far in 2025. Expectations are for August to show something of a reversal in this regard though, with industrial and manufacturing production likely to be positive for the month, potentially signalling some stability. “Issues remain in the UK. Inflation remains high, as do interest rates, as the Bank of England awaits assurance that inflation is under control before cutting further. Equity markets are clearly anticipating an improvement though as they sit right below all-time highs.” The agenda 7am BST: UK GDP report for August 7am BST: UK trade report for August 10am BST: Eurozone trade data for August 1pm BST: IMF Seminar: Debate on the Global Economy: “Shaping Economic Policies Amid a Shifting Global Landscape”