International Monetary Fund
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April 15, 2026
Dear reader, in the first of our daily briefings from the 2026 Spring Meetings, we spotlight the war in the Middle East’s impact on the global economy, financial stability risks, and much more as we mark the beginning of the IMF-World Bank Spring Meetings.
IMF Cuts Global Growth Forecast and Warns of Deeper Slowdown If Middle East War Continues
Global economic growth is projected to slow to 3.1 percent this year and could drop further if the consequences of war in the Middle East prove more severe than currently anticipated, according to the IMF’s latest World Economic Outlook.
Pierre-Olivier Gourinchas, the IMF’s chief economist, told a press briefing on Tuesday that the conflict had halted the momentum the world economy showed late last year. “The de facto closure of the Strait of Hormuz and serious damage to critical energy facilities in the Middle East raise the prospect of a major energy crisis should a durable solution not be found soon,” he said.
Given the extraordinarily high level of uncertainty, the IMF’s reference forecasts are complemented with two scenarios. Growth would slow to 2.5 percent under an “adverse scenario” of higher energy prices, rising inflation expectations, and tighter financial conditions throughout the year. Growth would drop to 2 percent in a “severe scenario,” in which energy supply disruptions extend into next year, with greater macroeconomic instability.
Countries will feel the impact differently. Low-income energy-importing countries are highly exposed, especially those with pre-existing vulnerabilities and limited buffers. But the damage is most severe for countries in the Gulf. What can policymakers do? Find out more about policy priorities in this blog.
Financial Markets Are Orderly Despite Being Tested by War
Financial markets are being tested by the war in the Middle East, though the broader financial system has been resilient so far while banks are well-capitalized and liquid, said Tobias Adrian, director of the IMF Monetary and Capital Markets Department.
“The financial system has been resilient so far,” Adrian told reporters Tuesday after the release of the Global Financial Stability Report. “Markets have been functioning in an orderly manner, and central banks have been supporting markets in several countries through liquidity facilities.”
Even so, it is important for countries to safeguard financial stability by closely watching the evolution of vulnerabilities, which are compounded by limited policy space, he said.
Elevated debt and rollover risk continue to make bond markets fragile in some countries, while risks in private credit and technology investment are a particular focus, he added.
“The task for policymakers is not in and of itself to predict shocks, Adrian said. “But rather to ensure that vulnerabilities are contained, are understood, and that actions can be taken if there are any instabilities that arise.” Find out more about policy priorities in this blog.
Navigating the War in the Middle East
The war in the Middle East is reshaping economic prospects in the region and beyond.
IMF Deputy Managing Director Bo Li noted that, amid heightened uncertainty, “we can see that all paths lead to higher prices and lower growth,” speaking at a panel discussion moderated by Gillian Tett, chair of the editorial board at the Financial Times.
Pakistan’s Finance Minister Mohammad Aurangzeb described how energy supply disruptions and longer shipping routes are creating immediate pressures for import-dependent economies, forcing difficult tradeoffs to protect households despite limited fiscal space.
BlackRock’s Mike Pyle explained that markets have so far absorbed the shock because its impact is highly differentiated, and the US has been “relatively insulated from global energy shocks.”
Meanwhile, IEA Chief Energy Economist Tim Gould compared the current energy shock to the 1970s oil crises, noting that today’s loss of 13 million barrels per day is more than double the 5 million barrels lost in the 1970s, making it a historically significant disruption.
The panelists agreed the crisis will accelerate a shift toward energy diversification, stockpiling, and policies focused on economic resilience.
Uruguay Lowers Inflation Through Clearer Communication
When inflation expectations in Uruguay remained continuously high, policymakers turned to a less traditional tool — clearer communication. Central Bank of Uruguay Governor Guillermo Tolosa said stronger messaging and the use of interest rates as the main policy tool helped bring inflation expectations down to target levels for the first time in 20 years.
Speaking at a Governor Talk discussion with IMF Western Hemisphere Department Director Nigel Chalk, Tolosa highlighted reforms introduced since 2020 that placed communication at the center of monetary policy.
“We had to be bold and use communication as a policy tool,” Tolosa said, noting that clear messaging helped rebuild public trust after years of high inflation expectations. Inflation has stayed below the tolerance range for over two years and has reached historic lows in 2026.
Governments Face Public Spending Balancing Act
How to respond quickly to shocks while ensuring public money is spent efficiently, fairly, and sustainably? That was the focus of a high-level event moderated by Rodrigo Valdés, Director of the IMF’s Fiscal Affairs Department. Panelists emphasized that speed alone is not enough; spending must be well targeted and anchored in long‑term reform.
Drawing on the U.S. COVID response, Michael Faulkender—Finance Chair at the University of Maryland and former U.S. Treasury Deputy Secretary—highlighted the limits of state capacity, arguing that governments are often forced into blunt policy tools by outdated systems. During the crisis, he said, officials were “building the airplane while we were in the air,” constrained by public IT systems that lag far behind those of the private sector.
Sariha Moya, Minister of Economy and Finance of Ecuador, described politically difficult but ultimately successful energy and fuel subsidy reforms. Subsidy cuts were coupled with immediate, visible compensation through targeted programs for transport, agriculture, and fisheries. Trust was built by delivering results quickly. “If we were saying we are reallocating these resources, implementation was immediate,” Moya noted.
Ethiopia’s experience underscored the importance of scale, planning, and ownership. Facing large demographic pressures and repeated shocks, the government used its homegrown reform agenda to reprioritize spending. Ahmed Shide, Minister of Finance of Ethiopia, said there was “an inclusive process engaging different segment of society that helped build broad ownership and support for reforms, with consistent communication to explain why the reforms are necessary and what the cost of inaction would be.”
From the IMF perspective, Deputy Managing Director Nigel Clarke emphasized that crisis support should be “targeted, temporary, and transparent.” Broad-based subsidies, he warned, are costly and inefficient, crowding out spending on growth and resilience. Ultimately, successful reform depends on institutions, communication, and public support—because durable spending reform is impossible without bringing people along.
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