IMF's Georgieva Says Middle East Conflict Makes Global Growth Cut Unavoidable

International Monetary Fund Managing Director Kristalina Georgieva said the fallout from the Middle East conflict makes a downgrade to the global growth outlook unavoidable.

Bloomberg reported on July 9 that Georgieva said in a statement the oil shock had put the global economy to the test at a time when fiscal buffers were thin. "What we know is that growth will be slower," she said. "That would be true even if a new peace holds."

The IMF is due to publish its World Economic Outlook next week, including updated forecasts for global growth. Georgieva said the fund had planned to raise its global growth forecast until before U.S. strikes on Iran began. But even in the most optimistic scenario, she added, a downgrade would be unavoidable once damage to infrastructure and supply chains from the Middle East conflict is taken into account.

She also addressed inflation. If inflation expectations become unanchored and risk fueling a vicious cycle of price increases, central banks should respond decisively with interest-rate hikes. At the same time, she said, there is value in waiting and watching under the current circumstances.