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Global finance leaders are meeting at the IMF and World Bank spring sessions amid rising concerns over the economic impact of the Middle East conflict. The institutions are expected to lower global growth forecasts and raise inflation estimates, with emerging economies facing the greatest pressure. Growth projections for developing markets have already been revised downward, while inflation is set to rise further under prolonged disruption. The crisis could also increase food insecurity and strain global supply chains. With high debt levels and limited fiscal space, countries may require significant financial support as policymakers focus on stabilising economies and managing inflation risks.
Global finance leaders are set to meet this week at the International Monetary Fund (IMF) and World Bank spring meetings amid rising concerns over the economic impact of the ongoing conflict in the Middle East. Advertisement
The war is being seen as a fresh shock to the global economy, following the COVID-19 pandemic and the Russia-Ukraine conflict in 2022. IMF and World Bank officials have indicated that they will lower global growth forecasts and raise inflation projections, with emerging and developing economies expected to be the most affected.
The World Bank has revised its growth outlook for emerging markets and developing economies to 3.65 per cent for 2026, down from 4 per cent projected earlier. In a prolonged conflict scenario, growth could fall further to 2.6 per cent. Inflation in these economies is now expected to reach 4.9 per cent, compared to an earlier estimate of 3 per cent, and could rise to 6.7 per cent under adverse conditions.
The IMF has also warned that up to 45 million additional people could face acute food insecurity if disruptions to global supply chains, including fertiliser shipments, continue.
Both institutions are preparing financial support measures as countries face rising energy costs and supply disruptions. The IMF estimates that low-income and energy-importing countries may require between USD 20 billion and USD 50 billion in emergency funding. The World Bank has said it could mobilise USD 25 billion in the near term and up to USD 70 billion within six months.
However, economists have cautioned governments against broad fiscal interventions, suggesting targeted and temporary measures to manage rising prices without worsening inflation.
The situation is further complicated by high global debt levels and limited fiscal space. Many emerging economies are entering this phase with weaker financial buffers, higher debt burdens and lower reserves compared to previous crises.
Officials have also highlighted the need to balance inflation control with economic growth and job creation. Developing countries are expected to add around 1.2 billion people to the workforce by 2035, increasing pressure on governments to sustain growth.
Global coordination remains a challenge amid geopolitical tensions, particularly between major economies. The Group of 20 (G20) is facing difficulties in aligning responses, limiting its ability to address the crisis collectively.
The meetings are expected to focus on stabilising economies, managing debt risks and ensuring financial support for vulnerable countries as the global outlook remains uncertain.
Source: Reuters
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