The same factors could push global inflation above 6 percent next year, it cautioned.
Finance ministers and central bank governors from around the world are set to talk about little else at the IMF-World Bank spring meetings this week in Washington, D.C., and the IMF’s numbers — like many from private-sector forecasters — make clear how serious the risks of a protracted major conflict are.
Hoping against hope
To be sure, the IMF’s baseline forecast still clings to the hope that things will return to normal by the middle of the year, leaving little more than a small dent in an economy that has performed more strongly over the last year than was widely feared when U.S. President Donald Trump launched his trade war against the rest of the world.
Under this central case scenario, growth would be 3.1 percent this year, only 0.2 percentage points less than the IMF thought in January. In 2027, it would be 3.2 percent, unchanged from the January forecast.
But under a severe scenario, with lengthy disruption to shipping in and out of the Persian Gulf and more widespread damage to energy production and export infrastructure, the IMF warned that oil prices could leap to an average of $125 a barrel by next year, and that European and Asian natural gas prices could triple. This could force central banks around the world to raise interest rates sharply to contain a new global wave of inflation.
The effects of such a disaster would be unevenly spread, the IMF warned, saying that: “In both [adverse and severe] scenarios, the impact on emerging markets would again be greater than that on advanced economies.”