IMF Downgrades Eurozone Outlook
International Monetary Fund (IMF) chief Kristalina Georgieva on Thursday further downgraded the economic outlook for the eurozone over the continued US-Iran conflict.
“The latest shocks from the war in the Middle East and the associated rise in energy prices have weakened the outlook and added to structural headwinds Europe already faced,” Georgieva said at the Eurogroup.
Growth for the region is forecast to decrease by 0.7 percentage points to 0.9 per cent in 2026 and rebound maginally to 1.2 per cent in 2027, she said, adding that the headline inflation forecast had increased to 2.8 per cent in 2026, with 2.3 per cent forecast for 2027.
Inflation and Growth Challenges
“What it means for the euro area is a very difficult balancing act,” she advised. “In the near term, the priority is to keep inflation expectations firmly anchored while cushioning the impact of the shock on households and firms within available fiscal space.”
Georgieva urged Europe to strengthen its economy by advancing market integration, encouraging innovation and safeguarding financial stability to improve resilience and productivity.
Warning of Global Recession Risks
She warned that the global economy was already well past the ‘not very good’ outcome of the Middle East war, adding that if the war persists, the world could slip into recession.
“So far, the two large economies, US and China, are holding quite well. That keeps the global growth average not very much further away from our reference scenarios. So if the euro area that is more vulnerable to the energy shock, we are downgrading more for global growth,” she added.
Energy Shock Drives Uncertainty
This comes as the US and Iran engage in fresh military attacks, further triggering global economic volatility. Three months into the Middle East war, global oil supply remains down by some 13 percent relative to pre-war levels, and global LNG supply by some 20 percent, driving up energy prices.
Article by Viory
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