IMF: Middle East war to slow growth, raise inflation

War in the Middle East will lead to higher inflation and slower global economic growth, the head of the International Monetary Fund (IMF), Kristalina Georgieva, told Reuters, with the Fund planning to cut its economic forecasts as early as next week.

The conflict has severely disrupted energy supplies. Global oil production has fallen by about 13 per cent after Iran restricted transit through the Strait of Hormuz, key to transporting a fifth of the world’s oil and gas.

Energy prices have risen sharply. The IMF therefore expects lower economic growth and higher inflation even if the fighting ends quickly. If the conflict lasts longer, the impact will be even more significant.

Poor countries dependent on energy imports are most at risk and have limited capacity to help their populations. However, the impact is also being felt by exporters such as Qatar, whose energy infrastructure has been damaged by attacks.

Organisations including the IMF, the World Bank and the International Energy Agency are planning a coordinated response. Food security is also a future risk, particularly if fertiliser supplies are disrupted.

(reuters, est)