IMF head says ending Iran war not enough to reverse higher prices, economic slowdown

The war in the Middle East will lead to higher inflation and slower global growth, the head of the International Monetary Fund tells Reuters ahead of a fresh forecast for the world economy planned by the global lender for next week.

Even if the conflict is swiftly resolved, the IMF is set to reduce its forecasts for economic growth and bump up its outlook for inflation, says Kristalina Georgieva, managing director of the IMF.

The IMF is expected to release a range of scenarios in its upcoming World Economic Outlook due on April 14. It signaled a possible downgrade in a March 30 blog post, citing the asymmetric shock of the war and tighter financial conditions. Without the war, the IMF had expected a small upgrade in its projection for global growth of 3.3 percent in 2026 and 3.2% in 2027.

“Instead, all roads now lead to higher prices and slower growth,” says Georgieva.

The war has shrunk global oil supply by 13%, she says, rippling through oil and gas shipments and into related supply chains such as helium and fertilizers.

Even a rapid end to hostilities and a fairly rapid recovery will result in a “relatively small” downward revision of the growth forecast and an upward revision of its inflation forecast, she says. If the war is protracted, the effect on inflation and growth will be greater.