Washington: International Monetary Fund (IMF) Managing Director Kristalina Georgieva stated on Wednesday that the global economy could encounter significant hurdles if the conflict in the Middle East continues and oil prices remain elevated.
According to Anadolu Agency, Georgieva spoke at a news conference during the IMF-World Bank Spring Meetings in Washington, expressing the IMF's vigilance regarding developments in the region. She conveyed hope that a recent ceasefire announcement might lead to lasting peace. Georgieva highlighted the substantial impact already felt by the global economy and warned of more challenging times if high oil prices persist.
Georgieva referred to the IMF's latest World Economic Outlook forecasts, noting the widespread effects of rising energy prices, with energy-importing economies bearing a heavier burden. She advised governments to proceed cautiously with policy responses, stressing the importance of avoiding broad measures that might exacerbate current issues.
She also advised against untargeted support measures like broad tax cuts, energy subsidies, and price controls, arguing that they could worsen existing economic distortions. Georgieva emphasized that while these measures are well-intentioned, they may prolong the hardships associated with high prices.
Georgieva pointed out the IMF's long-standing warnings about elevated public debt levels and the narrowing fiscal policy space due to repeated shocks. She expressed concern over physical disruptions in supply chains, particularly in Asia, where some countries rely heavily on imports from the Gulf region.
Regarding central bank policy, Georgieva advised monetary authorities with strong credibility to prioritize price stability but to avoid hasty actions. She suggested that credible central banks should signal their objectives without rushing, while those lacking credibility might need to issue stronger signals. She emphasized that actions should be tailored to specific country conditions.
The IMF has revised its inflation forecasts for 2026 upward, although Georgieva assured that the broader trend of disinflation persists despite some short-term reversals. She noted that while short-term inflation expectations have risen in the United States and the euro area, long-term expectations remain stable, which offers hope for a quicker resolution of hostilities.
Furthermore, Georgieva expressed concern over potential inflation impacts on food prices, warning that delays in restoring affordable fertilizer supplies could increase global food costs.