"High inflation and slow economic growth" - IMF expected to lower global forecasts due to conflict
War in the Middle East will lead to higher inflation and slower global growth, the head of the International Monetary Fund said, ahead of a new forecast for the world economy planned by the global lender next week.
The war has caused the worst global energy disruption in history, with millions of barrels of oil blocked by Iran’s effective blockade of the Strait of Hormuz, essential for transporting a fifth of the world’s oil and gas. “Even if the conflict is resolved quickly, the IMF is set to lower its growth forecasts and raise its inflation outlook,” said Kristalina Georgieva, the IMF’s managing director.
The IMF is expected to release a range of scenarios in its next World Economic Outlook report on April 14. Without the war, the IMF had expected a slight improvement in its forecast for global growth of 3.3% in 2026 and 3.2% in 2027. “Instead, all paths now lead to higher prices and slower growth,” Georgieva said.
The war has reduced global oil supplies by 13%, she said, affecting oil and gas shipments and related supply chains, such as helium and chemical fertilizers.
“Even a quick end to the conflict and a fairly rapid recovery would result in a “relatively small” downward revision to the growth forecast and an upward revision to the inflation forecast,” Georgieva said. If the war is prolonged, the effect on inflation and growth will be greater.
The war is expected to dominate the spring meetings between the IMF and the World Bank in Washington next week, with finance officials expected to come from around the world.
Poor and vulnerable countries without energy reserves will be hit hardest, Georgieva added, noting that many countries had little or no fiscal space to help their populations cope with price increases caused by the war.
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