WASHINGTON, June 15 - The global economy has, up to now, absorbed the shock of the Middle East war without showing clear signs of a synchronized slowdown, IMF Managing Director Kristalina Georgieva said on Monday. In a new blog post she noted that commodity prices, inflation and financial conditions have been affected by the conflict - but not yet to a degree that signals a global contraction.
Georgieva praised a recent agreement reached on Sunday between the U.S. and Iran to end their war and to reopen the Strait of Hormuz, calling it an important development. At the same time she issued a warning: a deepening of the conflict or renewed supply disruptions would pose a "clear risk to global growth," according to her post.
The IMF plans to issue an updated economic forecast on July 8. In April the fund published three possible scenarios for global gross domestic product growth in 2026 and 2027. The middle, labeled the "adverse scenario," projected global growth slowing to 2.5% in 2026 with headline inflation running at 5.4%.
Last month Georgieva had indicated the adverse scenario appeared to be unfolding. Her latest commentary, however, suggests the IMF could move back toward its reference scenario - the projection that assumed the Iran conflict would be short-lived and that envisioned 3.1% growth in 2026.
The framework deal between the U.S. and Iran represents the most significant step yet toward ending a war that began with joint U.S.-Israeli strikes on Iran in February and then widened into a regional conflict. That escalation has killed thousands, disrupted energy markets and heightened concerns about a possible global recession.
"More than three months into the war in the Middle East, the global economy appears to be holding up. Commodity prices, inflation and expectations for it, and financial conditions have all been impacted - but not yet in ways that signal a global slowdown," Georgieva wrote.
The coming weeks will test whether the recent diplomatic move and a reopening of a critical maritime chokepoint are sufficient to prevent the adverse scenario from materializing. The IMF's July 8 update will provide a refreshed assessment based on developments since the fund's April scenarios.
Summary: Georgieva says global growth has so far withstood the economic shocks from the Middle East war, but stresses that an intensification of hostilities or further supply disruptions would be a clear downside risk. The IMF will publish updated forecasts on July 8 after having laid out three scenarios in April.