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The conflict in the Middle East has led to a significant reversal of the International Monetary Fund's outlook for the global economy, IMF Managing Director Kristalina Georgieva said.
The IMF will release an updated World Economic Outlook report next week. In its previous report, published in January, it forecast global growth of 3.3% this year and 3.2% in 2027.
"If it weren't for this shock, we would have improved global growth. But now, even our most hopeful scenario includes a slowdown in growth. Why? Because of infrastructure damage, supply disruptions, loss of confidence and other damaging effects," said Kristalina Georgieva.
Speaking about the economic impact of the war, Georgieva said that, even in the best-case scenario, there will be no clean and tidy return to the previous status quo. She gave the example of shipping passages through the Bab-el-Mandeb Strait in the Red Sea, saying they had not fully recovered from attacks by Houthi militants, which began in late 2023.
“They remain stuck at about half their 2023 level. We don’t really know what the future holds for transits through the Strait of Hormuz… What we do know is that (economic) growth will be slower, even if the new peace is sustainable ,” Georgieva added, referring to the ceasefire between the United States and Iran.
She also said that the existing "ripple effects" of the war will last for some time, pointing to shortages of oil and jet fuel, as well as hunger for at least another 45 million people, with the problem potentially worsening over time due to high fertilizer prices.
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