The IMF is set to downgrade its global economic forecast due to the conflict in the Middle East

This was stated by Kristalina Georgieva, Managing Director of the International Monetary Fund, according to Reuters.

It is noted that the conflict in the region and Iran’s blockade of the Strait of Hormuz have caused the worst disruptions to global energy supplies in history. According to the Fund’s estimates, the hostilities have reduced global oil supplies by 13%, leading to disruptions in the supply of helium and fertilisers.

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

Even with a swift peace and recovery, it will not be possible to avoid a downgrade in forecasts: GDP growth will slow, and inflation will rise. However, a protracted conflict will deal a much heavier blow to the global economy

Poor, vulnerable countries without energy reserves will suffer the most. According to the Fund’s director, many countries had limited or no fiscal space at all to help their populations cope with the price rises caused by the conflict in the Middle East.

Some countries have already sought financial assistance, Georgieva said. She noted that the IMF could expand some existing lending programmes to meet the needs of these countries. 85% of the Fund’s members are energy importers.

At the same time, the Fund is cautioning governments against energy subsidies, noting that state payments could further exacerbate inflationary pressures.

The IMF is expected to present various economic scenarios in its next ‘World Economic Outlook’, which is scheduled to be released on 14 April.