IMF Managing Director Kristalina Georgieva warned at a conference that the Fund’s baseline outlook is no longer applicable as the Middle East conflict continues. The IMF’s “reference scenario,” which assumed a short-lived war and projected global growth of 3.1% with inflation at 4.4%, is now “further and further behind in the rear-view mirror,” she said.
According to Georgieva, the global economy has effectively shifted into the IMF’s “adverse scenario,” driven by prolonged conflict, oil prices around or above $100 per barrel, and rising inflationary pressures. Under this scenario, global growth slows to 2.5% in 2026, while headline inflation rises to 5.4%, reflecting a more challenging macro environment.
She also warned of significantly worse outcomes if the conflict persists into 2027, particularly if oil prices approach $125. In such a case, inflation would rise further, with a growing risk that inflation expectations become de-anchored—posing a more persistent threat to economic stability.
The IMF had outlined last month three possible paths for the global economy—reference, adverse, and severe scenarios—but current developments suggest a clear shift away from the baseline. With downside risks intensifying, the global outlook is increasingly defined by slower growth and higher inflation.
