Wed, Apr 08, 2026 page9

• Middle East war means ’all roads’ lead to higher prices, slower growth, IMF chief says

  • Reuters, WASHINGTON
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  The war in the Middle East will lead to higher inflation and slower global growth, International Monetary Fund managing director Kristalina Georgieva told Reuters on Monday, ahead of a forecast for the world economy planned by the global lender for next week.

  The war has triggered the worst-ever disruption in global energy supply, with millions of barrels of oil production shuttered due to Iran’s effective blockage of the Strait of Hormuz, crucial for shipping one-fifth of the world’s oil and gas. Even if the conflict is swiftly resolved, the IMF is set to reduce its forecast for economic growth and bump up its outlook for inflation, Georgieva said.

  The war is expected to dominate discussions among finance officials from around the world at next week’s spring meetings of the IMF and World Bank in Washington. The Fund is expected to release a range of scenarios in its upcoming World Economic Outlook due on April 14. It signaled a possible downgrade in a March 30 blog post, citing the asymmetric shock of the war and tighter financial conditions.

  

  International Monetary Fund managing director Kristalina Georgieva attends the 56th annual World Economic Forum meeting in Davos, Switzerland, on Jan. 23.

  Photo: Denis Balibouse, Reuters

  Without the war, Georgieva said the IMF had expected a small upgrade in its projection for global growth of 3.3 percent this year and 3.2 percent next year as economies continue to recover from the COVID-19 pandemic.

  "Instead, all roads now lead to higher prices and slower growth," said Georgieva, who will preview the spring meetings in a speech on Thursday.

  "We are in a world of elevated uncertainty," the IMF chief said, citing geopolitical tensions, technological advancements, climate shocks and demographic shifts. "All of this means that after we recover from this shock, we need to keep our eyes open for the next one."

  The war has shrunk global oil supply by 13 percent, Georgieva said, with the impact rippling through oil and gas shipments and into related supply chains such as helium and fertilizers.

  Even a rapid end to hostilities and a fairly rapid recovery will result in a "relatively small" downward revision of the growth forecast and an upward revision of its inflation forecast, she said. If the war is protracted, the effect on inflation and growth will be greater.

  Poor, vulnerable countries with no energy reserves will be hardest hit, Georgieva added, noting that many countries had little to no fiscal space to help their populations weather the price increases caused by the war, which in turn also increased the prospects of social unrest.

  Georgieva said some countries had already asked for funding help, but did not name them. She said the IMF could augment some existing lending programs to meet countries’ needs. Eighty-five percent of the IMF’s members are energy importers.

  The impact has been asymmetric, hitting energy-importing countries hardest, but even energy exporters such as Qatar are feeling the effect from Iranian strikes against their production facilities.

  Qatar expects it will take three to five years to restore 17 percent of its natural gas production because of the damage, Georgieva said, while the International Energy Agency has reported 72 energy facilities have been damaged in the war, one-third of which have suffered significant damage.

  "Even if the war is to stop today, there would be a lingering negative impact to the rest of the world," she said.
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