IMF flags energy and trade risk
The IMF trimmed 2026 global growth forecasts and warned the Iran war is weakening trade momentum and raising energy risks, with trade growth seen slowing from about 5.1% in 2025 to roughly 2.8% in 2026. Reports note the fund recommends avoiding broad fuel-price caps in favor of targeted transfers, signalling supply‑chain and affordability pressures for energy‑sensitive manufacturers (newsweek.com; en.tempo.co; economictimes.indiatimes.com).
The International Monetary Fund cut its 2026 global growth forecast to 3.1% on April 14 and said the war in the Middle East is testing a recovery that had only recently stabilized. (imf.org) The fund’s April 2026 World Economic Outlook says growth should slow further in 2027 to 3.2% only if the conflict stays limited in duration and scope, while global headline inflation rises modestly in 2026 before easing again in 2027. (imf.org) The same IMF projections show world trade volume growth dropping to 2.8% in 2026, after 5.1% in 2025, a sharp loss of momentum for cross-border shipments of goods and services. (imf.org) The IMF says the main channels are energy, supply chains and finance. In a March 30 blog, its economists wrote that about 25% to 30% of global oil and 20% of liquefied natural gas move through the Strait of Hormuz. (imf.org) That leaves large energy importers in Asia and Europe exposed to higher fuel and input costs, while poorer countries with thin reserves face a harder time securing supplies even at elevated prices. The IMF said the shock is global but uneven, with energy importers more exposed than exporters. (imf.org) For governments, the fund’s message is not to hold down fuel prices across the board. Rodrigo Valdes, the IMF’s fiscal affairs chief, told Reuters on April 15 that countries should avoid broad fuel subsidies and use targeted, temporary cash transfers instead. (usnews.com) Valdes said broad caps and subsidies weaken the price signal that pushes households and companies to cut consumption when oil is scarce. He said the policy choice matters more because the IMF sees a risk of recession if the conflict worsens and oil stays above $100 a barrel through 2027. (usnews.com) The fiscal backdrop is already tight. The IMF said global government debt reached 93.9% of gross domestic product in 2025 and is now expected to hit 100% of gross domestic product by 2029, one year earlier than it projected a year ago. (usnews.com) The fund is also warning that a longer or broader war would add to other risks already hanging over the outlook, including renewed trade tensions, tighter financial conditions and weaker confidence. Its April report says downside risks dominate. (imf.org) The immediate question is whether the conflict stays contained. The IMF’s baseline still assumes a limited war, but its latest forecasts now start from a world economy growing more slowly, trading less freely and paying more for energy. (imf.org; imf.org)
