JAKARTA – The war in the Middle East is expected to push inflation higher and hold back global economic growth. Quoted from Arab News, Tuesday, April 7, Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva said the impact of this conflict has spread to energy, supply chains, to food risks.
The main disruption came from energy supplies. Millions of barrels of oil production were halted due to Iran’s effective blockade of the Strait of Hormuz, a route through which about a fifth of the world’s oil and gas passes.
Launching an Arab News report, the IMF remains prepared to lower its forecast for global economic growth and raise its inflation forecast, even if the war ends in the near future. Various scenarios will be included in the World Economic Outlook report scheduled to be released on April 14.
Before the conflict worsened, the IMF actually predicted global growth of 3.3 percent in 2026 and 3.2 percent in 2027. However, the projection is now threatened to be revised. Georgieva said, “all roads lead to higher prices and slower growth.”
The IMF noted that global oil supplies had fallen by 13 percent. The impact did not stop at oil and gas, but also spread to other supply chains such as helium and fertilizer. If the war lasts longer, the pressure on inflation and growth is said to be greater.
Poor countries and energy-importing countries are expected to be the hardest hit. Many countries, said Georgieva, do not have enough fiscal space to withstand rising prices. The IMF also noted that about 85 percent of its members are energy-importing countries.
A number of countries are said to have requested funding assistance, although their names were not mentioned. The IMF opened the possibility of adding support through an existing loan program. Georgieva also reminded that widespread energy subsidies are not a solution because they can increase inflationary pressures.
The impact of this war is also felt in energy exporting countries. Qatar, for example, is estimated to need three to five years to recover 17 percent of its natural gas production due to damage to facilities. The International Energy Agency reported that 72 energy facilities were damaged during the war, and a third suffered significant damage.
Another risk is beginning to be seen in the food sector. The IMF is now coordinating with WFP and FAO. If the distribution of fertilizer is disrupted, food pressure could increase. For energy-importing countries such as Indonesia, this situation should be watched because global energy price fluctuations quickly spread to logistics costs and inflationary pressures.
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