IMF Chair Warns: Middle East War Will Lead to Global Economic Slowdown, Rising Inflation, and Heavy Blow to Poor Countries

The Caixin Finance APP reports — International Monetary Fund (IMF) Chair Georgieva issued a serious warning on Monday (April 6), stating that the Middle East conflict is causing severe shocks to the global economy, leading to a noticeable slowdown in economic growth and pushing up inflationary pressures.

This conflict has become a focal point of global attention and will dominate the discussion agenda at next week’s Spring Meetings of the IMF and World Bank.

The Middle East conflict becomes a core topic at international financial meetings

Georgieva clearly stated that this Middle East war has resulted in a 13% reduction in global oil supply, with its impact rapidly spreading through oil and natural gas transportation chains, affecting related critical supply chains such as helium and fertilizers. She pointed out that even if the conflict is resolved quickly, the IMF will still lower its global economic growth forecasts and raise inflation expectations accordingly.

At the IMF and World Bank Spring Meetings in Washington next week, this war is expected to be the main topic of discussion among financial officials from various countries.

Georgieva will deliver a speech on Thursday (April 9) to further introduce the details of the spring meetings. World Bank President Ajay Banga will also share his views at the Atlantic Council event on Tuesday.

Without the war, growth forecasts could have been slightly raised

According to Georgieva, if the Middle East conflict had not erupted, and as countries’ economies continued to recover from the pandemic, the IMF originally planned to slightly raise its global economic growth forecast in the upcoming World Economic Outlook report. The organization had previously projected in its January report that global GDP growth would reach 3.3% in 2026 and 3.2% in 2027.

However, the situation has now completely changed. Georgieva emphasized that all economic trends point toward rising prices and slowing growth.

The IMF plans to include a series of scenario analyses in its latest World Economic Outlook report, to be published on April 14. In a blog post on March 30, the IMF hinted at possible downward revisions, mainly due to asymmetric shocks from the war and tightening financial conditions.

The lasting impact of war on growth and inflation

Georgieva explicitly stated that even if hostilities end quickly and recovery is relatively fast, global economic growth forecasts will still be slightly downgraded, while inflation forecasts will be raised. If the war prolongs, the negative impacts on inflation and economic growth will be more severe.

She said, “We are in a highly uncertain world.” She also listed multiple factors such as geopolitical tensions, technological advances, climate shocks, and demographic changes, warning countries to remain vigilant for potential future shocks after recovering from the current one.

The conflict has directly impacted energy markets. Georgieva added that even if the war stops today, its negative effects on other parts of the world will persist.

Poor and vulnerable countries suffer the most

Georgieva emphasized that poor and fragile countries lacking energy reserves will bear the heaviest blow. She stated that many of these countries have little fiscal space to help their populations cope with rising prices caused by the war, further increasing the risk of social unrest.

Some countries are already seeking IMF financial assistance, and she said the IMF can expand some existing loan programs to meet these needs. Notably, 85% of IMF member countries are energy importers.

Georgieva opposes broad energy subsidy measures, urging policymakers to avoid implementing government subsidies that could further exacerbate inflationary pressures.

This shock exhibits clear asymmetric features, with energy-importing countries being hit hardest. Even energy-exporting countries like Qatar are affected, due to attacks on their production facilities by Iran. Damaged facilities mean Qatar expects it will take three to five years to restore 17% of its natural gas output.

Food security risks and future outlook

The World Food Programme previously warned that if the war continues until June, hundreds of millions could face severe hunger.

Georgieva pointed out that the IMF has not yet observed a full-scale food crisis, but if fertilizer supplies remain blocked, such a crisis could occur soon.

Overall, the Middle East war is profoundly changing the global economic outlook. Georgieva’s statements send a clear signal: countries need to prepare for the long-term economic consequences of this conflict. In today’s highly uncertain international environment, policymakers must act prudently to mitigate impacts on growth and livelihoods.

The IMF’s latest forecast adjustments will provide important references for global decision-making and serve as a reminder of the war’s amplifying effects on vulnerable economies.