"Oil could rise to $125 per barrel" - IMF chief warns of risks to global economy
The head of the International Monetary Fund (IMF) has warned that the global economy risks facing a "much worse outcome" if the war in the Middle East drags on until 2027, with oil prices rising to $125 a barrel.
IMF Managing Director Kristalina Georgieva said the ongoing conflict made the organization's "baseline scenario," which projected a slight slowdown in growth to 3.1% and a slight increase in prices to 4.4%, unrealistic. That scenario, she said, was based on the assumption of a short crisis.
“This scenario is getting further and further delayed with each passing day,” Georgieva said. She noted that the ongoing war, oil prices around $100 a barrel and rising inflationary pressures indicate that the IMF’s “adverse scenario” has already been activated.
"If this continues until 2027 and oil prices reach around $125, then we should expect a much worse outcome," Georgieva added, warning that there will be a new surge in inflation and destabilization of expectations.
Last month, the IMF presented three scenarios for the course of the global economy in 2026 and 2027, under the weight of uncertainty caused by the war in the Middle East: the "baseline scenario", the "adverse scenario" and the "severe scenario".
The unfavorable scenario predicts a slowdown in growth to 2.5% in 2026 and total inflation of 5.4%, while the severe scenario estimates growth of only 2% and inflation of 5.8%.
Georgieva said the IMF is closely monitoring the impact of the conflict on supply chains. Fertilizers, she said, are already 30% to 40% more expensive, which could lead to a 3% to 6% increase in food prices, affecting other sectors of the economy.
"What I want to emphasize is that this is really serious," she said, expressing concern that many policymakers are still acting as if the crisis will end soon, implementing measures that keep demand for oil high.
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