IMF Reports That a 10% Annual Increase in Oil Prices Raises Inflation by 0.4 Percentage Points

IMF Chief Warns of Economic Risks Amid Rising Energy Prices

Photographer: Aaron Schwartz/Bloomberg

According to Kristalina Georgieva, Managing Director of the International Monetary Fund, a sustained 10% rise in energy costs over a year could add 0.4 percentage points to global inflation and reduce worldwide economic growth by up to 0.2%.

“Despite repeated shocks, the global economy has shown impressive strength, maintaining a growth rate of 3.3%,” Georgieva said in an interview with Bloomberg Television’s Haslinda Amin during the IMF’s “Asia in 2050” conference in Bangkok. “However, this resilience faces new challenges.”

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IMF Managing Director Kristalina Georgieva has stated the organization is prepared to support nations experiencing balance of payment difficulties, especially as instability in the Middle East increases. She made these remarks during an exclusive interview at the IMF’s “Asia in 2050” conference in Bangkok. Source: Bloomberg

Georgieva cautioned that many countries are confronting the latest Middle East turmoil with limited financial reserves, having already been weakened by earlier crises. However, she pointed out that numerous Asian nations have improved their fiscal strength and foreign reserves over the last 20 years. The IMF is already in talks with some member states about possible financial assistance if the situation worsens.

Currently, the IMF is engaged in programs with 50 countries and is ready to expand existing support or introduce new initiatives if necessary, Georgieva said. She highlighted particular concern for oil-importing countries, Pacific Island states at the far end of supply chains, and low-income nations burdened by high debt.

“We urge all our members to take strong action to strengthen their economic foundations in these uncertain times,” Georgieva advised, recommending that governments closely track price and currency trends and rebuild fiscal buffers when conditions allow.

On Thursday, Georgieva emphasized that the world is facing “more frequent and unpredictable shocks,” with the ongoing Middle East conflict being the latest example. She encouraged policymakers to brace their economies for a range of risks, including technological disruptions and trade disputes, not just political instability.

Recent military actions by the US and Israel have resulted in significant casualties in Iran, which has retaliated with missile and drone attacks, including strikes on US forces in the region. These events have disrupted shipping through the Strait of Hormuz and caused oil prices to surge, raising fears of renewed inflation and slower economic growth.

Reporting assistance by Cecilia Yap and Linus Chua.

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