The International Monetary Fund (IMF) has warned that the global growth outlook may further worsen as the conflict in West Asia drags on longer than anticipated. The global body has said that global economic growth may further weaken if the conflict extends into 2027 and oil prices surge to around $125 per barrel.What was the Fund’s earlier ‘reference scenario’ is getting ‘outdated’ with each passing day as the conflict prolongs, IMF Managing Director Kristalina Georgieva said.The ‘reference scenario’ she was referring to meant the initial projection of a short-lived conflict, with global growth nearing 3.1 percent and inflation reaching 4.4 percent.
However, if the war prolongs, the growth forecast for 2026 may have to be pared down to 2.5 percent, with a heightened inflation mark of 5.4 percent, Georgieva said.
She said that as oil prices were hovering above the $100 per barrel mark and inflationary pressure building on the global economy, the IMF’s “adverse scenario” was increasingly becoming the working baseline.Last month, the Fund had outlined three possible growth outlooks for 2026-27: a baseline forecast, an adverse scenario, and a severe downturn case.The worst-case projection had global growth declining to 2 percent while inflation rises to 5.8 percent. “If this (the West Asia conflict) continues into 2027 and we have oil prices of $125 more or less, then we have to expect a much worse outcome,” she said.“Then we are going to see inflation climbing up and then inevitably, inflation expectations would start de-anchoring.”The IMF managing director also highlighted the broad-based impact of the crisis, pointing to a 30-40 percent surge in fertiliser prices. She warned that it could lead to food inflation climbing by 3-6 percent, with other sectors facing similar risks.Since the start of the Iran war, oil prices have surged over 70 percent. While the attacks have come to a halt since April 6, the supply of crude oil and natural gas has remained shut.