The President of the International Monetary Fund (IMF), Kristalina Georgieva, stated that despite persistently high inflation, the Iran war is a major contributing factor. In an interview on CBS's "Face the Nation" on Sunday, Georgieva pointed out that economic pain is not limited to the conflict countries, but has spread to a broader region.
She explained that countries close to the conflict zone are severely impacted, while those importing oil are particularly under pressure from rising costs, especially nations lacking coping mechanisms.
“This is a global issue. Every country needs energy, and the pressure from rising prices affects everyone. The impact is asymmetric, with different countries feeling the effects differently. If you are near the conflict, the impact is very significant; if you are an oil-importing country, the pressure is also high; if you lack reserves to protect yourself, your situation will be very difficult,” Georgieva said.
IMF data shows that poor economies are hit hardest by rising energy costs.
Georgieva noted that many economies in Asia are suffering the most due to their dependence on imported energy. “Whether in Asia or sub-Saharan Africa, vulnerable poor countries are being hit hard. When discussing coping measures, we will focus on these highly vulnerable nations,” she said.
Although a ceasefire agreement was reached last week, the situation remains unstable, and the future of the conflict is still uncertain, leading to significant uncertainty for workers, consumers, and businesses in the U.S. and elsewhere. A regular Wall Street Journal survey of economists shows that assessments of the economic outlook for the next year have fallen below earlier estimates from this year.
Nevertheless, most economists believe that this war will not completely cripple economies that have already experienced severe inflation and significant changes in trade and immigration policies. They now estimate a 33% chance of recession within the next 12 months, up from 27% in January.
The same survey conducted from April 3 to April 9 predicts that economic growth for 2026 will be revised down from 2.2% to 2%. Meanwhile, year-end consumer inflation expectations have also been raised to 3.2%, up from the previous 2.6%. Expectations for hiring have also become more pessimistic, with economists now forecasting a net job gain of 45,000 per month, down from the previous 64,500.
Georgieva also stated that even if the conflict diminishes in the coming days or weeks, the economic recovery will not be completed quickly. She told Margaret Brennan that the war has damaged infrastructure, and restoring these damages will take time. “We are hopeful for peace, which will improve living conditions for everyone, but we are also concerned about the impact on infrastructure. Many facilities have been damaged, and it will take time to restore them to full operation,” she said.
This means that even if the battlefield calms, economic turmoil may persist.
“One good piece of news we need to remember is that whenever we experience energy shocks, improvements follow,” she said. “Every past energy shock has led to two outcomes: increased energy efficiency and...”