The International Monetary Fund (IMF) has warned of a looming global inflation crisis as the conflict involving the US, Israel, and Iran darkens the world economic outlook.
IMF Managing Director Kristalina Georgieva confirmed on Thursday that the fund will downgrade its global growth projections next week, regardless of whether current ceasefire efforts succeed.
“Had it not been for this shock, we would have been upgrading global growth,” Georgieva stated during remarks preceding the IMF-World Bank Spring Meetings. “But now, even our most hopeful scenario involves a growth downgrade.”
War Reverses Economic Momentum
Before the conflict began on 28 February, the world economy showed resilience against shifting trade policies and import taxes. In January, the 191-country IMF had upgraded the global growth outlook to 3.3 per cent and was prepared to raise it again.
However, the violence has fundamentally altered that trajectory. The Middle East conflict has spiked oil and natural gas prices while severely damaging critical energy infrastructure, including refineries and tanker terminals. These disruptions extend to global food security, as shipments of vital fertilisers for farmers have been stalled, shaking the confidence of consumers and businesses alike.
Georgieva urged member nations to “get your house in order” to build economic strength as rising defence spending burdens the global stage.
Funding and Future Resilience
Despite the volatility, Georgieva expressed optimism that the US Congress will approve a quota review this year. This would increase lending resources by 50 per cent, making more of the IMF’s $1 trillion capacity accessible.
She noted that while the Fund maintains a “big cushion” of resources, the increase is essential for financial reassurance. “We don’t know what the future may bring,” she remarked.
A recent IMF report highlights that nations hosting active combat suffer an average 3 per cent output drop immediately, with cumulative losses reaching 7 per cent within five years. Interestingly, the report suggests the US economy might avoid direct output losses as there is no physical destruction on its soil, despite increased military spending.
Central Bank Pressure
The IMF growth forecast revision comes as central banks struggle to maintain stability. “The central bank cannot afford to let inflation spiral out of control,” Georgieva added, pointing toward the US Federal Reserve’s upcoming policy meeting on 28–29 April.
Global ripple effects are already surfacing. The Bank of Mexico warned on Thursday that the situation in the Middle East risks driving up inflation across Latin America’s second-largest economy, even as the US deals with a stalling job market linked to trade and immigration shifts.
