IMF warns war could drag global growth to 2 percent
- Apr 15
- 2 min read
The global economy is facing fresh uncertainty as the Middle East conflict disrupts growth and pushes inflation higher, according to a new report from the International Monetary Fund.
Before the conflict, global growth for 2026 was expected to reach 3.4%. That outlook has now weakened due to rising energy prices and supply disruptions, especially around the Strait of Hormuz.
The IMF says the crisis is impacting the economy in three key ways:
Higher energy and commodity prices are driving up costs and inflation
Supply chains are under pressure
Financial markets are becoming more volatile
In its base scenario, global growth could slow to 3.1% this year, while inflation rises to 4.4%.
If the conflict worsens, the outlook becomes more serious. Growth could fall to 2.5% or even 2% in a worst-case scenario while inflation may climb above 6%.
Countries that rely on imported energy are expected to be hit hardest, especially developing economies with limited financial support. At the same time, major oil-exporting nations may also face losses due to damaged infrastructure and reduced production.
The IMF warns that the situation is similar to the global price shock seen after Russia’s invasion of Ukraine, but with added risks due to ongoing global instability.
To limit the damage, the IMF says ending the conflict quickly is critical. Central banks may need to tighten policies if inflation rises further, while governments are advised to avoid broad subsidies and instead provide targeted support to vulnerable households.
Looking ahead, the report highlights the need for stronger global cooperation, investment in renewable energy, and long-term growth strategies to reduce the impact of future shocks.
Source : NewsFirst
More updates to come on AusNewsLanka.
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