The war in the Middle East will lead to higher inflation and a slowdown in global growth, the head of the International Monetary Fund (IMF) told Reuters on the eve of a new global economic forecast that the global financial institution plans to publish next week.
Even if the conflict is resolved quickly, the IMF will cut its growth forecasts and raise its inflation forecast, Kristalina Georgieva, IMF managing director, said.
The IMF is expected to publish a number of scenarios in its upcoming report "World Economic Outlook", due on April 14. The fund signaled a possible downgrade in a blog post on March 30, citing the asymmetric shock of the war and tighter financial conditions. Without the war, the IMF had expected a slight increase in its global growth forecast from 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 supply by 13%, she said, affecting oil and gas supplies and related supply chains, such as helium and fertilizers.
Even a quick end to hostilities and a relatively rapid recovery would result in a "relatively small" downward revision to the growth forecast and an upward revision to the inflation forecast, she said. If the war drags on, the effect on inflation and growth will be greater.