- Iran conflict will increase inflation and slow global economic growth
- IMF to present updated outlook in World Economic Outlook on April 14
- Global oil supply has decreased by 13 percent amid the conflict
International Monetary Fund (IMF) Managing Director Kristalina Georgieva has said that the Iran conflict will push inflation higher and lead to slower global growth. The IMF will formally present its revised outlook in the World Economic Outlook on April 14, she told Reuters.
Global oil supply has shrunk by 13 per cent. Gas shipments are delayed. Supply chains are strained. Prices are rising. Much of this is linked to Iran's effective blockage of the Strait of Hormuz, a narrow passage that carries nearly one-fifth of the world's oil and gas trade.
"All roads now lead to higher prices and slower growth," Georgieva added. Even if the Iran war ends quickly, the IMF expects to cut growth forecasts and raise inflation projections.
Until recently, the IMF had expected to slightly upgrade its global growth forecast to 3.3 per cent in 2026 and 3.2 per cent in 2027 as economies healed from the pandemic. However, the war has changed IMF's outlook over the past month.
Energy Shock Hitting All Sectors
The war disruption is not just limited to oil. Georgieva said the shock has spread to gas, helium, fertilisers and other linked supply chains. The International Energy Agency has reported damage to 72 energy facilities. One-third have suffered significant destruction.
Even energy exporters are not spared. Iranian strikes have hit production facilities in Qatar. The country may need three to five years to restore 17 per cent of its natural gas output.
This is why the IMF calls the impact "asymmetric". Energy-importing countries suffer first. But exporters also feel the aftershocks.
'Poor Countries To Face The Harshest Blow'
Georgieva warned that low-income, energy-importing countries will be hit the hardest. Most have little fiscal room left after the pandemic years. They cannot cushion citizens from rising fuel and food prices. This raises the risk of social unrest.
Eighty-five percent of IMF member countries are energy importers. Some have already approached the IMF for financial help. Georgieva, hoowever, did not name them. She said existing lending programmes may be expanded.
She also cautioned governments against broad energy subsidies. Such measures, she said, can worsen inflation.
IMF, IEA & World Bank Form Coordination Group
The crisis has pushed global institutions to act together. The International Monetary Fund, International Energy Agency, and the World Bank Group have formed a coordination group to track the economic and energy fallout.
In a joint statement, the bodies said the war has triggered "one of the largest supply shortages in global energy market history". They flagged rising prices of oil, gas and fertilisers. They warned of pressure on food prices. They pointed to disruptions in helium, phosphate and aluminium supply chains. Tourism has also been affected due to flight disruptions at Gulf hubs.
(With Inputs From Reuters)
