IMF sees risks to global growth forecast over sustained Iran war

NEW YORK

The International Monetary Fund warned that continuing disruptions due to the Iran war meant its global economic outlook was moving towards an “adverse” scenario, with growth pared down and greater risks to inflation.
Last month, the IMF’s World Economic Outlook predicted global growth would drop to 3.1 percent in 2026 in its “reference” scenario, but warned of a bleaker outlook if the war were to drag on.
In the “adverse” scenario, where oil prices remain higher for longer, inflation expectations become less stable and financial conditions tighten, growth would slow to 2.5 percent, the Fund said at the time.
On May 14, the Fund’s chief spokesperson said the global economy was headed toward this less auspicious situation.
“We are moving into the adverse scenario, but inflation expectations are still reasonably well anchored, and financial conditions still remain accommodative,” Julie Kozack told reporters in Washington.
The Fund also has a “severe” scenario, in which growth slows to 2.0 percent and inflation flares to six percent.
An update of the World Economic Outlook is due in July.
The IMF was in “active discussions” with member states over their needs, and “many countries are actually asking us for support in the policy area,” said Kozack.
During the IMF’s spring meetings last month, Managing Director Kristalina Georgieva said as many as 12 countries could require financial assistance from the Fund, with $20-50 billion required in total.
Kozack said that discussions on that financial assistance were continuing, but that the Fund was not yet prepared to disclose which specific countries were involved.