IMF Warns of Escalating Israel-Iran Conflict

IMF Chief Economist Pierre-Olivier Gourinchas warned on Tuesday that a broader conflict between Israel and Iran could push energy prices up, forcing central banks to tighten monetary policies and slow down growth.

Gourinchas, speaking at a press briefing, said the IMF’s latest report indicates a potential 15% hike in oil prices due to Middle East tensions, adding to inflation by 0.7%.

Despite this, the IMF raised its 2024 global growth forecast to 3.2%, up from 3.1% last year.

The US economy is expected to grow by 2.7% this year, outpacing China’s growth at 4.6%. The IMF report also highlighted ongoing global growth amid falling inflation.

Gourinchas noted challenges like supply disruptions from the coronavirus pandemic and Russia’s war on Ukraine, but praised the banking system’s resilience.

Despite inflation, there hasn’t been a domino effect on wages and prices.

By the end of 2022, global growth hit a low at 2.3%.

The IMF’s latest forecasts predict steady growth of around 3.2% in both 2024 and 2025, with inflation easing from 2.8% to 2.4% by the end of 2025, revealed Gourinchas.

Most signs indicate a smooth downturn, he added.

As per Gourinchas, markets are excited about central banks moving away from strict monetary policies. Financial conditions have relaxed, stocks are up, and money is flowing strongly into most emerging economies except China. Some countries have managed to reduce income gaps and regain market access.

The IMF’s top economist explained that it’s good news that the pandemic’s economic impact is expected to be less severe than previously thought, especially in emerging economies.

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