IMF cuts global growth estimates to 3.1% in 2026

Due to the war, the International Monetary Fund cuts the estimates of global growth: from the 3.4% estimated last January, the Pil will grow 3.1% this year. A necessary downward revision essentially due to conflict in the Middle East. Indeed, Washington experts explain World Economic Outlookin the absence of the war, global growth would have been revised upwards to 3.4%.

The new estimate of 3.1% is based on a “baseline forecast” based on the assumption that the war “will be limited in duration, intensity and scope, such that disruptions will abate by mid-2019.” 2026“. But new ones have also been developed scenarioswhere the conflict lasts longer or expands. “The probability that these scenarios will materialize – we read in WOW – progressively increases with the continuation of hostilities and disturbances”.

Adverse scenarios and impact on inflation

In the case of “more substantial and persistent increases in energy prices“, that theFmi identifies in an “adverse” scenario, global growth would slow further to 2.5% in 2026 andinflation would reach 5.4%. In a more serious scenario, which the IMF defines as “severe” and in which greater damage is recorded to energy infrastructure in the conflict region, “the impact would be even more pronounced”: global growth would shrink to only around 2% in 2026, while overall inflation would be just above 6% by 2027.

Fiscal policies and defense spending

In this situation, IMF experts explain, “navigating an economic and geopolitical undergoing profound change requires policies that are robust.” For example, “the increase in defense spending provoked by an escalation of geopolitical tensions could stimulate economic activity in the short term, but also generate inflationary pressuresweaken fiscal and external sustainability and risk stifling the social spendingwhich in turn could trigger social discontent and unrest.”

Recommendations for financial stability

The Fund’s economists argue that where the fiscal support is deemed necessary to protect the most vulnerable, it should be targeted, timely and temporary. To replenish reserves, governments should mobilize revenue and make the more efficient spending. More generally, the priorities concern the maintenance of price stability and financial. The central banks should remain vigilant to prevent prolonged supply shocks from destabilizing the inflation expectationsmaintaining transparent communication and strong independence.