ASIATODAY.ID, WASHINGTON – The global economy is facing another major stress test as the conflict in the Middle East continues to disrupt energy markets, raising concerns over inflation, economic growth, and financial stability, according to the International Monetary Fund (IMF).
Speaking at the IMF’s regular press briefing on Thursday, IMF Communications Director Julie Kozack said the recent conflict has once again highlighted the fragility of the global economic recovery. While the ceasefire and the gradual reopening of the Strait of Hormuz are encouraging developments, the economic fallout is expected to linger.
“We welcome the cessation of hostilities and the reopening of the Strait of Hormuz. If sustained, these developments will support the global economy,” Kozack said.
According to the IMF, the economic impact of the conflict is being assessed through three key transmission channels: commodity prices—particularly oil, second-round effects on inflation and inflation expectations, and tightening financial conditions.
Energy Prices Remain a Key Risk
Although crude oil prices have retreated from their wartime peaks, the IMF noted that they remain roughly 10% above pre-conflict levels.
Prices for jet fuel, natural gas, base metals, and several fertilizers have also begun to ease. However, the Fund cautioned that full normalization will take time as global shipping routes and supply chains continue to recover.
“It will take time for vessels to resume normal operations, for cargo to reach ports, and for supplies to move through distribution networks to businesses and consumers,” Kozack explained.
Developing Economies Face the Greatest Pressure
The IMF warned that emerging and developing economies remain the most vulnerable, particularly net energy-importing countries with limited fiscal space.
Many countries across Africa and parts of Asia are experiencing mounting pressure from higher energy import costs, which are fueling inflation, widening fiscal deficits, and constraining governments’ ability to support economic activity.
The Fund said it remains focused on assisting its most vulnerable member countries as they navigate the ongoing energy shock.
India Remains a Global Growth Engine
Despite the challenging global backdrop, the IMF continues to view India as one of the world’s strongest growth engines.
The Fund maintained its forecast of 6.5% economic growth for India’s 2026–27 fiscal year, supported by resilient domestic demand and solid macroeconomic fundamentals.
Although India has been affected by higher energy import costs, the IMF said the country entered the crisis from a position of strength, supported by substantial foreign exchange reserves, relatively low inflation, and a manageable current account deficit.
Updated Global Outlook Coming on July 8
The IMF confirmed it will publish its updated World Economic Outlook (WEO) on July 8, 2026, providing revised global growth projections that reflect the latest developments in the Middle East conflict and broader international economic conditions.
The Fund said it is continuing to monitor energy markets, inflation trends, and global financial conditions before finalizing its updated forecasts.
During the briefing, the IMF also provided updates on economic developments in Venezuela, Argentina, Lebanon, Ukraine, Egypt, Sri Lanka, Ethiopia, Zambia, Angola, Senegal, Kenya, and South Africa, emphasizing macroeconomic stability, debt sustainability, and structural reforms as critical priorities amid heightened global uncertainty. (AT Network)
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