The head of the International Monetary Fund (IMF), Kristalina Georgieva, has warned that the ongoing Middle East conflict could significantly weaken the global economy if it persists and keeps oil prices elevated.
Georgieva said the conflict has already caused “significant pain” for economies worldwide, expressing hope that the current ceasefire could lead to lasting peace, while cautioning that economic damage is already unfolding.
She noted that global growth is expected to slow from 3.4% last year to 3.1% in 2026. However, in a worst-case scenario involving prolonged conflict and sustained high oil prices, growth could drop sharply to around 2%.
The IMF chief highlighted that rising energy prices are affecting all countries, but the burden is heaviest on energy-importing and low-income economies with limited policy flexibility.
Georgieva emphasized that policymakers must prioritize macroeconomic and financial stability, warning against rushed or broad policy responses such as untargeted subsidies, tax cuts, or price controls, which may prolong inflationary pressures.
She also cautioned that global public debt is projected to exceed 100% of global GDP by 2029, reaching levels not seen since the aftermath of World War II.
Calling for careful fiscal management, she urged governments to balance sustainability with targeted support for vulnerable groups, while avoiding policies that could undermine long-term stability.
Georgieva further stressed the importance of structural reforms to boost productivity and growth, noting that strong economies are better equipped to withstand future shocks.
“A strong economy is the best buffer,” she said, underscoring the need for countries to rebuild policy space once current challenges ease.
