00:00The war in Middle East will lead to higher inflation and slower global growth.
00:04The head of the International Monetary Fund told Reuters on Monday
00:08ahead of a fresh forecast for the world economic plant by the global lender for next week.
00:13Even if the conflict is swiftly resolved,
00:16the IMF is set to reduce its forecast for economic growth and bump up its outlook for inflation.
00:22Kristalina Jerojiva, Managing Director of the IMF, said.
00:27The IMF is expected to release a range of scenarios in its upcoming World Economic Outlook due on April 14th.
00:34It signaled a possible downgrade in a March 30 blog post,
00:37citing the asymmetric shock of the war and tighter financial conditions.
00:42Without the war, the IMF had expected a small upgrade in its projection for global growth of 3.3%
00:48in 2026 and 3.2% in 2027.
00:52Had we not had this war, we would have seen one small upgrade of our growth projections.
01:04Instead, all roads now lead to higher prices and slower growth.
01:13What we observe is threefold.
01:19One, the impact is large.
01:23Just to compare to COVID time,
01:27in COVID time, oil supply shrank by 12%.
01:35That was both demand and supply shock.
01:39But, you know, supply shrank.
01:41This time, oil supply has shrunk by 13%.
01:46So we have a significant impact from oil, from gas,
01:52and from the interruption of supply chains from fertilizers to helium.
01:57Second, the impact is global.
02:04Everybody around the planet feels it.
02:08Energy importers feel it a lot.
02:14Now, even energy exporters, countries in the Gulf, Iraq,
02:21they also feel the impact.
02:23Because they cannot get gas, oil,
02:26they have facilities that are being bombed.
02:29You just look at Qatar.
02:33They are stating that 17% of their gas production
02:40is going to be absent for the next three to five years
02:45because of the damage done.
02:49According to the International Energy Agency,
02:5372 energy facilities production distribution have been damaged.
03:01One-third of those damaged more significantly.
03:06So even if the war is to stop today,
03:10there would be lingering negative impact to the rest of the world.
03:15And three, the impact is asymmetric.
03:17And I want to stress this point
03:20that when you are a poor, vulnerable country
03:26with no energy reserves whatsoever,
03:30with no fiscal space to protect your businesses and your people,
03:35and that hits you,
03:37then, of course, it is a very painful, painful impact.
03:42When we look at the world,
03:47so our membership will be here for our spring meetings.
03:51It's a very good opportunity to discuss
03:54what actions can be taken,
03:56how to learn from each other.
03:58But when they come,
04:0085% of our members are energy importers.
04:05So for many, many, many of those who would be coming,
04:09this issue of the impact of the energy shock
04:13would be top of mind.
04:16The war has shrunk global oil supply by 13%, she said,
04:20gripping through oil and gas shipments
04:22and into related supply chains such as helium and fertilisers.
04:26Even a rapid end to hostilities and a fairly rapid recovery
04:29will result in a relatively small downward revision
04:32of the growth forecast
04:33and an upward revision of its inflation forecast.
04:37If the war is protracted,
04:39the effect on inflation and growth will be greater.
04:41The war is suspected to dominate the IMF World Bank's spring meetings
04:45in Washington next week,
04:46with finance officials flying in from around the world.
04:50Poor, vulnerable countries with no energy reserves
04:53will be hardest hit,
04:54Georgieva added,
04:55noting that many countries had little to no fiscal space
04:58to help their populations
05:00whether the price increases caused by the war.
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