(March 6): A 10% increase in energy prices that persists for a year would push global inflation up by 40 basis points and slow economic growth by 0.1-0.2%, International Monetary Fund managing director Kristalina Georgieva said.
“The world economy has been remarkably resilient. Shock after shock, and yet growth is at 3.3%,” Georgieva told Bloomberg Television’s Haslinda Amin in an interview on the sidelines of the IMF’s “Asia in 2050” conference in Bangkok. “But this resilience is being tested yet again.”
Georgieva warned that many countries are facing the latest Middle East crisis with “depleted buffers” after previous shocks, though she noted that many Asian economies have built stronger fiscal capacity and reserves over the past two decades. The IMF is already in discussions with some members about potential balance of payment assistance should the uncertainty deepen.
The fund currently has programmes with 50 countries and stands ready to augment existing arrangements or create new ones if needed, Georgieva said on Friday. She expressed particular concern for oil-importing nations, Pacific Island economies that sit “at the end of the supply chain,” and low-income countries with high debt levels.
“Our advice to all our members: Act decisively to get your own house in best possible order in this world of higher uncertainty,” Georgieva said, urging policymakers to carefully monitor price and currency developments while rebuilding fiscal buffers during good economic times.
On Thursday, Georgieva warned of a “world of more frequent, more unexpected shocks,” with the war in the Middle East being the latest example. She called for policymakers to prepare their economies for potential challenges, which go beyond politics to include disruptive technology and trade conflicts.
See also: Global funds pull money from Asia at fastest pace in years
The attack by the US and Israel has killed hundreds in Iran, which in turn has unleashed barrages of missiles and drones against its assailants, including US forces in the region. Shipping through the Strait of Hormuz has dwindled and oil prices have spiked, threatening to ignite inflation and choke off growth.
This story was produced with the assistance of Bloomberg Automation.
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