Managing Director Kristalina Georgieva said the war had caused the most severe disruption to global energy supply on record, with millions of barrels of oil production shut down due to Iran’s effective closure of the Strait of Hormuz.

“Instead, all roads now lead to higher prices and slower growth,” Georgieva told Reuters, adding that the IMF would cut its growth forecasts and raise inflation projections in its upcoming World Economic Outlook.

The conflict is expected to dominate discussions at next week’s IMF and World Bank spring meetings in Washington, where policymakers will assess the economic fallout from the crisis.

The Fund had previously anticipated a modest upgrade to global growth projections before the escalation.Georgieva said global oil supply had fallen by about 13%, with knock-on effects extending beyond energy markets into supply chains for commodities such as fertilizers and helium.

Brent crude prices have risen to around $110 per barrel, reflecting tightening supply conditions.She warned that even a swift resolution would leave a lasting economic impact, while a prolonged conflict would deepen inflationary pressures and further dampen growth prospects.

The effects are expected to be uneven, with energy-importing countries facing the greatest strain. Many low-income economies lack the fiscal capacity to cushion rising costs, increasing risks of economic instability and social unrest.

Georgieva said some countries had already sought financial assistance from the IMF, which could expand existing lending programs to address urgent needs. She cautioned against broad energy subsidies, arguing they could exacerbate inflation.Energy exporters have also been affected.

Damage to production infrastructure has slowed output recovery in some countries, including Qatar, where restoration of natural gas capacity could take several years.The IMF is coordinating with other global institutions, including the International Energy Agency and the World Bank, to assess the broader implications of the conflict.

Georgieva also highlighted risks to food security, noting that disruptions to fertilizer supplies could trigger wider shortages if the conflict continues.

The World Food Programme has warned that millions could face acute hunger if conditions worsen.

Aiyar cautioned that the simultaneous downturn in the world’s two largest economies would inevitably exert a strong downward pull on the entire global economy.

While the recent trade tensions between the United States and India have garnered significant attention, economists warn that a potential slowdown in the world’s two largest economies, the US and China, poses a far greater threat to India’s economic stability. Swaminathan Aiyar, a prominent economist and consulting editor at ET Now, emphasized that the ripple effects of a major recession in these global powerhouses would significantly outweigh the impact of any bilateral tariff disputes.   

Aiyar’s concerns arise amidst escalating uncertainty in the global economy, largely fueled by President Donald Trump’s aggressive trade policies. Despite a temporary 90-day pause on planned tariffs against several nations, including India, following a sharp decline in US stock markets, the underlying tensions remain. Moreover, China’s retaliatory measures, including increased tariffs on US goods, further exacerbate the situation.   

The economist had previously criticized Trump’s tariff announcements, labeling them a potential “Recession Day” rather than a “Liberation Day,” as the president had claimed. He argued that these policies would disrupt global supply chains, impede economic growth, and plunge the world economy into turmoil. Aiyar dismissed Trump’s assertion that tariffs would revitalize American manufacturing, predicting instead economic disruption.   

The erratic nature of Trump’s trade policies, with frequent changes occurring within hours, has created a climate of uncertainty for economists and investors. Goldman Sachs, while revising its recession forecast, still anticipates a significant US economic slowdown. Conversely, JPMorgan Chase maintains a more cautious outlook, assessing the probability of a US recession as still higher than not. This divergence in expert opinion underscores the precarious state of the global economic landscape, even after the temporary tariff reprieve.   

India’s central bank, the Reserve Bank of India (RBI), has already responded to these growing global uncertainties by reducing its economic growth forecast for the current financial year. The RBI also lowered the repo rate, citing concerns about weakening demand, tighter liquidity, and emerging global risks stemming from the escalating trade tensions.   

Moody’s Analytics has echoed these concerns, trimming its growth outlook for India in 2025, attributing the downward revision to the potential fallout from the US tariff measures. Despite the temporary freeze on some tariffs, Moody’s analysts highlighted that their current forecast reflects the potential economic damage should these tariffs be fully implemented in the future.   

Earlier warnings from leading global banks, including Morgan Stanley and Nomura, had already identified India, along with Thailand, as among the economies most vulnerable to the impact of reciprocal tariffs imposed by the US on key trading partners.   

According to Aiyar, a full-scale financial meltdown may have been averted, primarily due to pressure from the bond market rather than diplomatic efforts. However, he remains convinced that a US recession is highly probable. Furthermore, he anticipates a significant economic slowdown in China, even if the country avoids negative GDP growth, effectively mirroring the impact of a recession.   

Aiyar cautioned that the simultaneous downturn in the world’s two largest economies would inevitably exert a strong downward pull on the entire global economy. The unpredictability of President Trump’s future trade actions has become an embedded factor in the global economic equation, influencing investor behavior and fostering a climate of risk aversion.   

The prevailing uncertainty surrounding US trade policy is prompting investors to prioritize safety, further dampening economic activity. As Aiyar aptly stated, the constant ambiguity of Trump’s next move is “getting baked into everything else,” leading to a cautious approach across global markets.   

In conclusion, while the bilateral trade discussions between the US and India are important, the potential for a significant economic slowdown in the United States and China presents a far more substantial risk to India’s economic prospects. The interconnected nature of the global economy dictates that a downturn in these major engines of growth would have widespread and severe consequences, dwarfing the impact of any specific tariff disputes. The prevailing uncertainty and the potential for a synchronized slowdown necessitate a cautious and adaptive approach to economic policy in India.

Deepshikha Singh is an analytical content writer who enjoys turning complex information into compelling stories. Her passion lies in uncovering insights and sharing them in a way that’s both informative and engaging.

The value of the Iranian “dinner table” shrank by 12.4 percent for urban households and by 17.2 percent by rural households

President Rouhani has told the Iranian people that the country is moving toward greater economic stability — despite recent International Monetary Fund (IMF) research that shows Iran has one of the worst shrinking economies in the world and that poverty is on the rise.

Speaking at a press conference on October 14, Rouhani said the country had been through what he described as a “somewhat” critical situation and is now moving toward “economic tranquility.”

He cited statistics — including rates of inflation, unemployment, economic growth and currency exchange rates — to support his message of economic hope. But, if this claim is true, why has this sensation of “economic tranquility” not trickled down to the Iranian people?

“Point-to-point inflation has reached 34 percent, down from 52, and we expect the downward trend to continue until the end of the year,” said Rouhani. He was referring to a Statistical Center of Iran study that reported that the rate of inflation fell from 52 percent in May to 35 percent in September. His comments are like saying that, although a tropical storm is raging, winds of 100 kilometers per hour are a sign of tranquility because they are gentler than the winds of 200 km per hour experienced the day before. What he failed to mention is that there are no reliable forecasts to suggest the economic climate is set to improve.

Even if it could be assumed that inflation is on a downward trend, talking about “tranquility” in such a crisis seems inappropriate. Over the last year inflation has caused both vast economic and social damage that, even in the best case scenario, will take a long time to repair.

The greatest damage inflation has inflicted is the growth of poverty and Iranian families’ decreasing access to necessary goods. According to the parliament Research Center’s latest official report on poverty in Iran, which covers the Iranian calendar year 1395 (March 20, 2016 to March 20, 2017), 14 percent of all Iranian households, or close to 17 percent of the population, lived under the absolute poverty line during that period, meaning that they could not afford to purchase food that would enable them to consume 2,100 calories per day. By autumn 2018 this figure had reached 24 percent — 23 percent of urban households and 26 percent of rural households. If it can be assumed this trend continued into 2019, the shocking reality is that more than one-third of Iranians live under the absolute poverty line. So a third of Iranians are likely to be suffering from hunger and malnutrition.

According to estimates by the Research Center, this year the per capita cost of providing 2,100 calories per day has risen by close to 42 percent compared to last year [Persian link]. The report also estimates that by autumn 2017, close to one-fourth of Iranian families had been dragged beneath the poverty line and, based on these figures, it recommends that the government take active policy measures to ensure the “food security” of 57 million Iranians, or close to 70 percent of the population.

At the same time, according to a report published by the website Rouhani Meter, which describes its aim as “to monitor the accomplishment of promises made by Iranian President Hassan Rouhani,” between 2016 and 2018, the value of the Iranian “dinner table” shrank by 12.4 percent for urban households and by 17.2 percent by rural households [Persian link]. To illustrate the point, if we imagine that all Iranians are sitting around one dinner table, then one person from every five villagers and one in eight city dwellers would have to leave the table to make it possible for the remaining people to have the same amount of food that they had two years before.

Denying a Very Unhappy Reality

In such a situation, talking about “economic tranquility” is not only inappropriate, but it will likely lead Iranians to regard their president as a liar who has failed to recognize and even denies the very unhappy reality of their lives. In their view, he has denied the accumulated poverty that will need years of peace, stability and economic growth to fix. Again, there is no reliable evidence to suggest that such a recovery can take place.

Rouhani claims that Iran’s economic growth, which was negative last year is now positive. Perhaps he is referring to economic growth without taking into account the oil sector. But this is a misleading indicator because, according the IMF, in 2019 Iran had the third worst shrinking economy in the world, with a growth rate of -9.5 percent. This constitutes one of the biggest drops in economic growth in Iranian history.

If this drop in growth is added to the current gross domestic product, and to the severe economic fluctuations over the last decade, it is easy to see that Iran’s economic growth in the 2010s has been zero — complete bankruptcy, in other words. Since 2011, the population of Iran has grown by 10 percent, meaning that in these years each Iranian has lost on average one-tenth of his or her economic power, while the economies of rest of the world, including Iran’s neighboring countries, have continued to grow.

Even if, despite this, Rouhani’s claim can be believed, and it can be accepted that this year’s economic growth — without taking oil unto account — has been positive (although close to zero), it is impossible to deny the effects of the accumulated recession. In such conditions, claims that the situation is getting better are in fact deceptive. The situation has to improve to such an extent before it can be described as bearable — so an improved economic environment for the majority of Iranians seems a very far way away.

Article first published on IranWire.