IMF Warns Of Slower Global Growth As Middle East Conflict Drives Oil Prices Higher

The International Monetary Fund has cautioned that global economic growth is likely to remain subdued as ongoing conflict in the Middle East drives up oil and energy prices.

Ahead of its annual Spring Meetings in Washington next week, the IMF has urged finance ministers and central bank governors to prioritise prudent fiscal and monetary policies in response to heightened uncertainty.

The institution also warned governments against rolling out unsustainable relief measures, instead recommending temporary and targeted support for vulnerable populations.

Global Growth Outlook Weakens As Middle East War Disrupts Supply Chains

The IMF has advised policymakers to adopt a cautious, wait-and-see approach as economies continue to deal with supply disruptions linked to tensions involving the United States, Israel and Iran.

Managing Director Kristalina Georgieva indicated that a downgrade to global growth projections is increasingly likely, with additional risks including rising food insecurity and near-term inflation pressures.

“What we do know is that growth will be slower even if the news peace is durable. We also know that there are different variations of the impact of this shock around the world. Countries able to export oil and gas around the world are the least affected, in contrast, countries directly disturbed by the war including oil and gas exporters who suffered the blockade and countries relying on imported oil and gas bear the brunt of the impact.”

IMF Urges Targeted Fiscal Support And Vigilance On Inflation Risks

Georgieva stressed that many countries are already burdened by elevated debt levels, making it essential to limit fiscal interventions to short-term, targeted measures aimed at protecting the most vulnerable.

She added that central banks should remain prepared to tighten monetary policy if inflationary pressures intensify.

“For now there’s value in waiting and watching with central banks stressing their commitment to price stability, but otherwise staying on hold with a stronger bias to action if credibility is in question, fiscal authorities should provide with their medium term fiscal frameworks. If inflation expectations threaten to break anchor and ignite a costly inflation spiral, the central banks should step in firmly with rate hikes.”

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The IMF noted that volatility in Brent crude markets has affected both oil-importing and oil-exporting nations, highlighting the broad economic impact of the conflict.

Further analysis, including the implications for Sub-Saharan Africa, is expected to be discussed in detail during the upcoming Spring Meetings.