Doha: Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva said that the war in the Middle East will lead to higher inflation and slower global growth.
According to Qatar News Agency, Georgieva indicated that the war has reduced global oil supplies by 13 percent, impacting oil and gas shipments and related supply chains such as helium and fertilizers. She stated that even if the conflict is resolved quickly, there will still be a relatively small downward revision to growth forecasts and an upward revision to inflation forecasts.
Georgieva emphasized that poor and vulnerable countries without energy reserves will be the most impacted, highlighting that many nations lack the financial resources to help their populations cope with the price increases resulting from the conflict. She noted that the IMF had received requests for financial assistance from some countries and mentioned the possibility of enhancing existing lending programs to meet these needs.
Meanwhile, the IMF has warned that the ongoing conflict in the Middle East poses a "severe test" for the stability of emerging markets, as it has led to a reversal in foreign capital flows. This is attributed to the heightened sensitivity of non-bank investors to crises, as detailed in an analytical chapter of its 2026 Global Financial Stability Report.
The report revealed that portfolio investment flows to emerging markets have surged eight-fold since the global financial crisis, reaching a cumulative value of approximately $4 trillion by 2025. It highlighted that debt has become the primary driver, with portfolio debt obligations now accounting for 15 percent of emerging market GDP, up from 9 percent in 2006.
The IMF urged emerging market governments to adopt defensive strategies. These include strengthening fiscal buffers, as countries with ample foreign exchange reserves and robust institutions experience fewer capital outflows; allowing currencies to fluctuate to absorb shocks, with limited foreign exchange market interventions only when necessary; and simulating severe economic shock scenarios to ensure the resilience of financial institutions to sudden interruptions in external financing.