War in the Middle East: Global Economy Permanently Affected, United States Spared

Before the war, we were preparing to adjust our growth forecasts, described AFP’s chief economist at the IMF, Pierre-Olivier Gourinchas. They are now being lowered. “Our base forecasts are based on a relatively short conflict with temporary energy market disruptions that disappear next year,” explained Mr. Gourinchas.

In these conditions, global growth is at risk of being limited to 3.1%, compared to the 3.3% expected by the organization in January. In the event of a prolonged war, the worst-case scenario from the IMF predicts a growth of 2%, which is low – and rare – on a global scale. The United States is expected to be among the countries least economically affected by the conflict. The institution expects growth of 2.3% in 2026, which is 0.1 point less than the previous projection in January.

Amid the surge in oil prices, the IMF has also raised its inflation forecasts, which had been decelerating until now. The Fund now expects an average price increase of 4.4% worldwide, which is 0.6 points higher than projected in January. “There should be a slight increase in inflation excluding food and energy but it should not last, and prices should resume their deceleration pace in 2027,” said the Fund’s chief economist.

Emerging markets resist

The impact of the conflict, both in terms of loss of growth and price hikes, is unevenly distributed worldwide. Concerning growth, the Middle East, North Africa, and Central Asia region are unsurprisingly the most affected by the effects of the war, with growth halved across the region.

Saudi Arabia, the main economy of the region, sees its growth revised to 3.1% for this year, 1.4 points less than the IMF’s previous estimate.

Conversely, the impact should be minimal, or even non-existent, for major emerging countries, with China losing only 0.1 percentage point of growth this year, at 4.4%, while India sees its growth revised upwards by 0.1 point, to 6.5%, and Brazil by 0.3 points, at 1.9%.

Another potential winner: Russia, whose growth is expected to reach 1.1% this year, compared to 0.8% in the previous estimate in January. For Moscow, the rise in oil prices is “a good thing in terms of export revenue. It is one of the main reasons that led us to revise our growth projection for Russia upwards,” specified Mr. Gourinchas.

Among advanced economies, besides the minimal impact on the United States, Japan and Canada seem to be more resilient than Europe. The United Kingdom is the hardest hit country among advanced economies, with a 0.5-point revision compared to the estimate of January, and growth now expected to be 0.8%.