ISLAMABAD – World economy is on the brink as the war in Middle East has sent oil prices soaring, disrupting energy supplies.
Amid the dire situation, IMF chie warned that this conflict could push inflation higher and slow global growth, hitting the poorest countries hardest. Even if the fighting ends soon, the economic ripple effects may linger for quite some time.
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 global lender is expected to release a range of scenarios in its upcoming World Economic Outlook due on April 14.
IMF signalled possible downgrade citing asymmetric shock of the war and tighter financial conditions. Without the war, Georgieva said the IMF had expected a small upgrade in its projection for global growth of 3.3% in 2026 and 3.2% in 2027 as economies continue to recover from the 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. World Bank President Ajay Banga will present his view at an Atlantic Council event on Tuesday.
“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%, Georgieva said, with the impact rippling through oil and gas shipments and into related supply chains such as helium and fertilisers.
Vulnerable countries with no energy reserves will be hardest hit, Georgieva said, 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.
She mentioned that some nations already asked for funding help, but did not name them. IMF could augment some existing lending programs to meet countries’ needs. Eighty-five percent of the IMF’s members are energy importers.
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