IMF Warns Middle East War Is Pushing Prices Up and World Growth Down

Overview

• IMF research released this week links the renewed conflict in the Middle East to faster inflation worldwide and slower global growth.
• Preview chapters of the World Economic Outlook say wars leave lasting damage, with output falling about 3% at the start and close to 7% after five years on average.
• The Fund reports a broad military buildup, with half of countries raising defense budgets since 2020 and nearly 40% spending more than 2% of GDP in 2024, as NATO members plan a 5% target by 2035.
• IMF economists warn that higher defense outlays are often financed by deficits, which strain public finances, push up prices, weaken currencies, and drain foreign exchange reserves.
• Managing Director Kristalina Georgieva says the IMF expects to cut its global growth forecast, raise inflation projections in the full outlook next week, and has already received requests for financial assistance.