WASHINGTON, D.C. — International Monetary Fund Managing Director Kristalina Georgieva said the IMF now expects a downgrade in its projection for global growth in 2026 as a result of the Middle East war, reversing what had been a projected small upgrade prior to the conflict. Georgieva outlined the fund's updated economic assessment in Washington, D.C., detailing disruptions to energy supply, trade routes, and financial flows.

Oil prices have surged nearly fifty percent due to the war, and seventy-two energy facilities have been hit, one third of them with severe damage, according to Georgieva. She said thirteen percent of global oil flows and twenty percent of global gas flows have been stuck for five weeks. The reduced energy supply, combined with sustained demand, has produced a negative supply shock that has pushed global energy prices higher.

Damage to a gas field in Qatar will delay its return to full capacity by three to five years, she said. Helium exports from Qatar have also been reduced, affecting supply for semiconductor manufacturing and MRI machines. The IMF is running economic impact scenarios for the war based on its duration, assessing both the size and length of the shock.

The economic impact has been asymmetric, affecting countries differently based on their proximity to the conflict, reliance on oil imports, and reserve capacities. The United States has been less affected than many countries because it is a net energy exporter, though the IMF's projection that U.S. inflation would return to target by early 2027 may now be delayed. Rising energy prices function like a tax on income, with low-income populations most affected, according to Georgieva.

Several countries in the Asia-Pacific region have already taken emergency measures. South Korea has called on its citizens to conserve energy. India is rationing energy supply. The Philippines has declared a national energy emergency, and gas stations in Australia are running out of fuel due to supply disruptions. Remittances from workers in Gulf states to countries such as India and Bangladesh have been disrupted, and one third of flights to Sri Lanka, which transit through the Gulf, have been affected, with consequences for Sri Lanka's tourism sector.

Poor and vulnerable countries in Asia and Sub-Saharan Africa are being more severely affected due to limited fiscal capacity to absorb shocks, she said. The IMF's response will focus on those highly vulnerable countries, providing policy advice to help them manage the economic fallout.

European airlines are experiencing difficulties with access to jet fuel, and airline ticket prices have increased. She noted that historically, energy shocks have led to improvements in energy efficiency, diversification of energy supplies, and advances in green energy, though such improvements typically take one to two years to materialize.