Inflation is staying hot for longer, and IMF Managing Director Kristalina Georgieva says the Iran war is a big reason why. Speaking Sunday on CBS’ Face the Nation, Kristalina said the economic pain is spreading well beyond the countries involved in the fighting.
Kristalina explained that countries close to the conflict are taking a hard hit. She also said oil-importing nations are getting squeezed, especially those with little protection against rising costs.
“It is global. Everybody uses energy. Everybody feels the pinch of prices going up. And it is asymmetric. It affects different countries differently. If you are in the vicinity of the conflict, it’s a big hit on you. If you are an oil importer, it is a big hit on you. If you have no reserves to protect yourself, you are in a very tough situation,” Kristalina said.
IMF says poorer economies absorb the hardest blow from higher energy costs
Kristalina then said some of the worst pain is now being felt across Asia, where many economies rely heavily on imported energy.
“Poor, vulnerable countries, whether they’re in Asia or in Sub-Saharan Africa, they’re being hammered dramatically, and when we discuss our response, we will zero in on these highly vulnerable countries,” said Kristalina.
We know that last week brought a cease-fire, but it was shaky, and the future of the conflict is still unclear. That leaves a lot of uncertainty for workers, shoppers, and businesses in the United States and elsewhere. A regular Wall Street Journal survey of economists now shows a weaker outlook for the year ahead than earlier estimates this year.
Even so, most of those economists do not think the war will fully knock down an economy that has already lived through sharp inflation and major policy changes in trade and immigration. They now put the chance of a recession in the next 12 months at 33%, up from 27% in January.
The same survey, taken from April 3 through April 9, cut its 2026 growth forecast to 2% from 2.2%. It also raised its estimate for year-end consumer inflation to 3.2% from 2.6%. The outlook for hiring got weaker too. Economists now expect net job growth of 45,000 a month, down from the earlier estimate of 64,500.
Oil market damage keeps inflation pressure alive in America’s economy
Kristalina also said there will be no quick repair job, even if the fighting cools in the coming days or weeks. She told Margaret Brennan that the war has damaged infrastructure, and that damage will take time to undo.
“We have hopes for peace that would improve the conditions for everybody, but we are also looking at impact on infrastructure. A lot has been damaged, and it would take time to bring back to full operation,” she said.
That means even if the battlefield goes quieter, the economic mess can keep going.
Kristalina said the current crisis could push more governments toward greener energy plans, even though those plans will not help overnight.
“The one good thing that we need to remember is that whenever we have an energy shock, we improve,” she said. “Every energy shock in the past would lead to two things: more energy efficiency and more diversification of energy.”
Cryptopolitan reported on Friday that America’s latest inflation report said economists think those oil disruptions can keep lifting prices in the months ahead even if the cease-fire holds.
The survey expects West Texas Intermediate crude, the main U.S. oil benchmark, to fall to $79.66 a barrel by the end of the year.
That would still be about 18% below Friday’s closing price of $96.57. But economists still raised their year-end forecast for core inflation, which strips out food and energy, to 2.9% from 2.6%.
That measure is based on the personal consumption expenditures index, which the Federal Reserve watches closely. They were also asked how high crude would need to go for recession odds to climb above 50%.
Answers ranged from $95 to $225 a barrel, with an average of $146. Estimates for how long oil would need to stay high ranged from four weeks to 55 weeks, with an average of 12 weeks.
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Source: https://www.cryptopolitan.com/imf-predicts-war-driven-inflation/
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