IMF warns of slower global growth amid Middle East conflict

The International Monetary Fund says it will lower its global growth forecast due to the ongoing Middle East conflict, warning of lasting economic damage despite a fragile ceasefire.

IMF Managing Director, Kristalina Georgieva, said the war’s “scarring effects” would weigh heavily on the global economy.

“Even in a best case, there will be no neat and clean return to the status quo ante,” Ms Georgieva said.

She noted that rising energy costs, infrastructure damage, disrupted supply chains and declining market confidence would all contribute to weaker-than-expected growth—even under the most optimistic scenario.

Rising financial pressure

Ms Georgieva disclosed that the IMF may need to provide between $20 billion and $50 billion in balance-of-payments support to countries affected by the crisis.

She added that at least 45 million people could face food insecurity as the war’s economic fallout deepens.

Global response

At the ongoing spring meetings in Washington, co-hosted by the IMF and the World Bank, global economic leaders are assessing the impact of the conflict.

World Bank President, Ajay Banga, said the institution could mobilise up to $25 billion quickly for affected developing countries.

Mr Banga added that as much as $60 billion could be made available over time if the situation worsens.

War-driven economic shocks

The conflict—sparked by the US-Israel war on Iran—has disrupted global supply chains and driven oil prices higher, particularly after Iran moved to restrict access through the Strait of Hormuz.

Tehran and Washington have since exchanged accusations over ceasefire violations, even as diplomatic efforts continue toward a more stable truce.

Ms Georgieva highlighted that low-income, energy-importing countries are bearing the brunt of the crisis.

She cited Pacific Island nations as particularly vulnerable due to their dependence on long and fragile supply chains.

Inflation and food insecurity concerns

The World Bank warned that the Middle East conflict has already taken a “serious and immediate economic toll,” projecting regional growth—excluding Iran—to slow to 1.8 percent in 2026.

The IMF is also expected to revise global inflation upwards due to rising oil prices and supply chain disruptions.

A joint statement by the IMF, World Bank and the World Food Programme warned that increases in oil, gas and fertiliser prices, alongside transport bottlenecks, will likely push food prices higher globally.

Background

Recent IMF analysis shows that countries directly affected by war typically experience an immediate three percent drop in economic output, with declines continuing for years.

Earlier assessments of the Iran conflict indicated that prolonged disruptions—particularly in fertiliser supply—could significantly worsen global food security.

The looming downgrade in global growth highlights the far-reaching economic consequences of geopolitical conflicts, with vulnerable nations facing the greatest risks.

It also signals potential increased reliance on international financial institutions for emergency support as governments grapple with rising debt and repeated economic shocks.