IMF says the biggest risk is prolonged conflict
The International Monetary Fund (IMF) said on Thursday that a prolonged war in the Middle East and further disruptions to energy production, shipping routes, or critical infrastructure pose the biggest risk to regional and global economies.
Additional takeaways
Biggest risk is prolonged conflict.
Middle East war causes highly uneven economic shock across region, severe strain on directly affected states.
Pre-war surpluses, alternative paths and demand shifts helped mitigate oil output shock, but cushions are limited.
IMF urges countries to rebuild buffers, prioritize price stability, tighter monetary policies and prudent fiscal measures.
Inventories are lower, spare capacity tighter, fresh disruption could trigger bigger price shifts.
Predicts 1.3% shrinkage in Middle East, North Africa and Pakistan area in 2026 vs 3.3% expansion in 2025.
Oil exporters hit by war to face sharp contraction in 2026, rebound in 2027, but output stays below pre-war forecasts.
Robust but uneven recovery forecast in Middle East, North Africa and Pakistan region by 2027, growth to reach 6.6%.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.