International Monetary Fund sounds alarm over potential global inflation surge

IMF Warns of Potential Inflationary Crisis Amid Ongoing Conflict

The International Monetary Fund (IMF) has issued a warning about a potential economic crisis, citing the ongoing US-Israel war on Iran as a major factor. According to IMF Managing Director Kristalina Georgieva, the fund will downgrade its forecast for the world economy next week.

Georgieva stated that the conflict has had a significant impact on global energy markets, driving up prices of oil and natural gas, and damaging refineries and other energy infrastructure. The war has also disrupted shipments of fertiliser, which are essential for farmers worldwide.

The IMF’s latest report highlights the economic consequences of war, stating that output in countries affected by conflict falls by approximately 3% at the onset and continues to decline over time, resulting in cumulative losses of around 7% within five years.

Georgieva emphasized the need for member countries to build resilience in the face of defence spending, which is weighing on the global economy. She also expressed optimism about the IMF’s ability to secure approval from the US Congress this year for a quota increase, which would provide additional lending resources and make more of its $1 trillion in capacity available.

The IMF has released a report outlining the economic impact of war on the global economy, which suggests that countries engaged in foreign conflicts may avoid large economic losses due to the lack of physical destruction on their own soil. However, Georgieva noted that central banks must be cautious not to let inflation spiral out of control.

The comments come ahead of the US Federal Reserve’s policy meeting, where interest rates are set to be decided on April 28-29. The IMF’s warning adds to the economic uncertainty surrounding the conflict, which is also affecting other countries, including Mexico, where a central bank has warned that conflict in the Middle East could push up inflation.

Source: Al Jazeera