IMF alert: the war will leave less growth, more inflation and 45 million people at risk of hunger

The managing director of the IMF, Kristalina Georgieva, gave a speech that marks the main theme of the organization’s spring meetings, which begin next week in Washington and bring together all the economy ministers and heads of Central Banks in the world, including the Argentineans Luis Caputo and Santiago Bausili.

On Tuesday they will publish the Report on Global Expectations, where the exact figures of the forecasts will be known.

Georgieva described the conflict in the Middle East, which is now experiencing a fragile truce, as “a supply shock” of great magnitude that once again shook a global economy that had been showing signs of resilience.

“A resilient global economy is being tested again,” he said, while emphasizing that the impact is already being felt “all over the world.”

The coup, he explained, has three central characteristics: It is large, global and unequal. “The daily flow of oil was reduced by around 13% and that of liquefied natural gas by 20%,” he noted. It also warned about shortages of key components such as fertilizers, helium and sulfur.

That disruption pushed up energy prices and created knock-on effects on the rest of the economy, he said. And he noted that a barrel of Brent went from $72 before the offensive to a peak of $120. Although it later retreated, prices are still “much higher than before the war,” he said.

The consequences They are already visible. The IMF warns about fuel shortages, transportation and trade disruptionsand a worsening of food insecurity. “Another 45 million people or more could fall into food insecurity,” Georgieva warned, in a context in which the total number of people affected by hunger exceeds 360 million.

The agency identifies three main channels of contagion. First, the direct impact of prices and scarcity, which fuels inflation. Second, the risk that inflation expectations become unanchored. And third, the tightening of financial conditions, with the rise of the dollar and widening of spreads in emerging markets.

Despite this, the official highlighted that, for now, long-term inflation expectations “have not moved,” which she considered “very good and very important.”

However, the central message is clear: global growth will be lower. “Even our most optimistic scenario implies a downward revision of growth,” he stated, although he did not provide concrete figures on the forecasts, which will be revealed during the Assembly.

Before the outbreak of the conflict, the IMF was considering improving its projections, driven by investment in technology and the strength of activity, he said. The problem, he warned, is that the damage goes beyond the short term. He said “key infrastructure has already been affected,” such as the Ras Laffan gas complex in Qatar, whose full recovery could take three to five years. “There will be no clean and orderly return to the status quo ante,” he said.

“We don’t know how long it will take to reopen the Strait of Hormuz, but we know it will affect the world economy,” he said.

The impact, furthermore, will be uneven. More than 80% of countries are net oil importers, and therefore the most exposed. In particular, the IMF focused on sub-Saharan Africa and small island states, which combine high energy dependence with less fiscal space.

What can countries do? “We cannot go through this without pain,” he said. In this context, Georgieva called to avoid responses that aggravate the situation. “Don’t make the numbers worse.” And he warned: “I appeal to all countries to reject unilateral actions such as export controls or price controls, which could worsen global conditions. Do not add gasoline to the fire,” he warned.

The Fund’s recipe aims to prudent policies: “targeted and temporary” fiscal support for the most vulnerable sectors and central banks attentive to inflation, with room to raise rates if expectations deteriorate.

The room for maneuver, however, It is limited. “The world has a fiscal space problem,” he noted, warning that public debt levels are much higher today than two decades ago and that the cost of financing continues to increase.

Looking ahead to the coming months, the IMF predicts that the demand for financial assistance grow. He estimates that countries could need between $20 billion and $50 billion in support.