The head of the International Monetary Fund, Kristalina Georgieva, warned that the war in Iran would leave irreversible scars on the global economy, even if a lasting peace agreement is reached in the Middle East, UNN reports with reference to The Guardian.
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In a speech delivered amid the threat of a ceasefire agreement breaking down in the conflict, Kristalina Georgieva said that the "devastating consequences" caused by the war to date would mean slower global growth this year than initially expected.
Had the conflict not erupted six weeks ago, the IMF would have raised its forecast for global growth in 2026, Georgieva said. "But now even our most optimistic scenario predicts a slowdown in growth. Even in the best case, there will be no clear and clean return to the status quo."
The publication notes that six weeks into the conflict, the fate of a conditional ceasefire announced late on Tuesday appears to be in jeopardy, as Washington and Tehran disagree on what was agreed.
The global oil price rose on Thursday amid volatile conditions in global financial markets, highlighting fears of continued disruptions to energy supplies through the Strait of Hormuz, which are key to fueling the global economy.
In her speech, which was to open the IMF's annual spring meetings in Washington next week, Georgieva said there was increased uncertainty about the depth of the global slowdown caused by the war.
However, every scenario the body has developed for its flagship World Economic Outlook report, to be released on Tuesday, shows a persistent hit to living standards.
Last autumn, the IMF forecast global growth of 3.1% in 2026, a slight slowdown from 3.2% growth in 2025, as an AI-driven investment boom helped provide "unexpected resilience" despite Donald Trump's tariff wars.
Georgieva said the global economy entered the war with Iran with "significant momentum," fueled by technology investments and favorable financial market conditions.
However, she said that infrastructure damage, supply disruptions, loss of confidence, and other war-related consequences would damage the global economy regardless of whether a peace agreement is reached.
Pointing to uncertainty about shipping in and out of the Persian Gulf and the amount of time needed to restore production at damaged oil and gas facilities across the region, the IMF managing director said the world was poised for further disruptions.
"The fact is, we don't really know what's in store for transit through the Strait of Hormuz or, for that matter, for the resumption of regional air travel," she said. "What we do know for sure is that growth will be slower — even if the new peace is durable."
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In a sign that for some countries the slowdown will be sharper than for others, Georgieva noted that oil-importing countries, poorer countries, and small island states would be particularly hard hit. However, she urged governments worldwide to "refrain from acting alone," such as export and price controls.
"This could further worsen the global situation: don't add fuel to the fire," she said.
As many countries enter the crisis with elevated debt levels and higher borrowing costs, the IMF chief urged governments to focus on targeted and temporary support measures for the most vulnerable households.
She said that expensive, widespread tax cuts or energy subsidies could risk fueling inflation and undermining fragile public finances. Central banks must also act cautiously, keeping interest rates unchanged but being ready to act to curb inflation.
"All countries must allocate their limited fiscal resources responsibly, and most must act decisively to recover from this shock. I cannot emphasize this enough," she said.
Her comments came after Bank of England Governor Andrew Bailey said the global economy faced a "very big shock" from the war.
Bailey, who also chairs the Financial Stability Board, an international body that monitors the financial system, told the European Parliament's Economic and Monetary Affairs Committee that risks remain while the situation in the Middle East remains volatile.
"Over the last month, we've obviously had a very big shock with the conflict breaking out in the Middle East, which has obviously caused a lot more market volatility," he said.