The chief of the International Monetary Fund cautioned on Thursday that the Iran war is worsening the prospects for the global economy, regardless of how long a shaky ceasefire lasts.
Next week, the fund will lower its prediction for the global economy, according to Managing Director Kristalina Georgieva.
“We would have been upgrading global growth if it weren’t for this shock,” Georgieva stated before the IMF-World Bank spring meetings next week. “But even our best-case scenario now calls for a growth downgrade.”
When President Donald Trump decided to slap broad levies on imports from the majority of the world’s nations last year, the global economy showed resilience.
The 191-nation IMF had raised the prognosis for global growth to 3.3% in January, and it was set to do so once more when its updated projections were released on Tuesday.
However, everything changed when the war broke out on February 28. Oil and natural gas prices have increased as a result of the battle, which has also damaged oil refineries, tanker ports, and other energy infrastructure, interfered with fertilizer supplies that are essential to the world’s farmers, and undermined consumer and business confidence.
Following Trump’s threat that “a whole civilization will die tonight,” the United States and Iran said on Tuesday that they had achieved a ceasefire.
However, Georgieva stated on Thursday that “growth will be slower—even if the new peace is durable.”
According to Georgieva, small island nations and Sub-Saharan Africa are especially at risk from the energy shock.
Because their debts are already so huge, governments all around the world are only partially able to boost their economies through tax cuts and expenditure increases.
She pointed out that numerous nations have taken action to lessen the impact of the energy shock, including encouraging or mandating individuals to work from home, promoting greater use of public transit, and restricting public leaders’ travel.
Georgieva urged decision-makers to “be careful not to make things worse” by taking “go-it-alone” actions like restricting exports and enforcing pricing restrictions. “Avoid adding gasoline to the fire,” she said.
