IMF Warns Middle East War Slashes Global Growth

IMF Chief Economist Pierre-Olivier Gourinchas stated the global economy is more resilient than during the 1970s oil shocks due to reduced oil dependency and diverse energy sources. However, the IMF expects higher inflation this year at 4.4 percent, up 0.6 percentage points from January.

These projections assume a relatively short-lived conflict; adverse scenarios with sustained high energy prices slow global growth to 2.5 percent or even 2.0 percent. The war disproportionately impacts the Middle East and vulnerable economies, with growth projections for the Middle East and Central Asia cut by half to 1.9 percent.

Saudi Arabia's growth forecast dropped 1.4 percentage points to 3.1 percent. US growth is still set to accelerate to 2.3 percent, while China's growth is anticipated to cool to 4.4 percent.

The IMF expresses concern that inflation expectations are not as well-anchored as before, potentially requiring central banks to raise interest rates.