Finance leaders from across the world will meet in Washington this week under the shadow of the Middle East conflict, with the International Monetary Fund (IMF) and the World Bank expected to lower growth forecasts and raise inflation projections as the war disrupts the global economy, according to Reuters report.The conflict marks the third major shock to the global economy after the Covid-19 pandemic and Russia’s invasion of Ukraine in 2022, adding fresh pressure on an already fragile recovery.Top officials from the IMF and World Bank have indicated that emerging markets and developing economies will be hit hardest by higher energy prices and supply chain disruptions triggered by the war.Before the conflict began on February 28, both institutions had expected to upgrade their growth outlook, supported by resilience in global economic activity despite tariff measures introduced by US President Donald Trump last year. However, the war has altered that trajectory.The World Bank now estimates growth in emerging markets and developing economies at 3.65 per cent in 2026, down from 4 per cent projected earlier, and warns it could fall further to 2.6 per cent if the conflict persists. Inflation in these economies is now expected to rise to 4.9 per cent, up from 3 per cent, with a potential spike to 6.7 per cent in a worst-case scenario.The IMF has warned that around 45 million more people could face acute food insecurity if disruptions to fertiliser supplies continue.The two institutions are also preparing to step up support for vulnerable economies at a time when public debt levels are already elevated and fiscal space remains constrained.The IMF has estimated that low-income and energy-importing countries may require between $20 billion and $50 billion in emergency support in the near term. The World Bank has said it could mobilise about $25 billion through crisis response tools immediately, and up to $70 billion over six months if required.Economists, however, have cautioned against broad-based fiscal measures to offset rising prices, warning that such steps could worsen inflation, and instead called for targeted and temporary support.“Leadership matters, and we’ve come through crises in the past,” World Bank President Ajay Banga told Reuters, adding that fiscal and monetary discipline had helped economies weather earlier shocks. “But this is a shock to the system.”Countries now face the challenge of containing inflation while sustaining growth and addressing longer-term issues such as job creation for an estimated 1.2 billion people expected to enter the workforce in developing economies by 2035.The crisis is unfolding amid a more fragmented global landscape, with heightened tensions between the United States and China and a weakened ability of the Group of 20 (G20) to coordinate responses.The United States, which currently holds the G20 presidency, has excluded South Africa from participation, complicating efforts to build consensus among major economies.“You’re trying to operate on consensus when there’s no consensus in the world right now on anything,” said Josh Lipsky, chair of international economics at the Atlantic Council, Reuters quoted.Lipsky said statements by the IMF, World Bank and other multilateral institutions were aimed at reassuring markets and signalling continued support for vulnerable economies.“It’s a signal to private creditors. This is not a time to flee countries that are in problematic waters. They will have support from the multilateral development banks and the international financial institutions. This is not going to be COVID. This is something that we can handle,” he said.Analysts say the crisis could prove more challenging for emerging economies than previous shocks, given weaker buffers and rising debt levels.Mary Svenstrup, a former senior US Treasury official now with the Center for Global Development, said many such economies entered the crisis with higher debt vulnerabilities, lower reserves and reduced fiscal space.“We need to have this crisis be a catalyst for IMF stakeholders to really rethink how the Fund supports vulnerable countries with the recognition that we’re going to be seeing more global shocks,” she said. “We can’t ask them to sacrifice growth and development for the sake of rebuilding buffers.”She added that any additional financing should be tied to reforms and potentially broader debt relief.Martin Muehleisen, a former IMF strategy chief now with the Atlantic Council, said the IMF should work with donor nations to accelerate debt restructuring and help countries move out of prolonged debt cycles, linking fresh lending to credible debt-reduction plans.Eric Pelofsky, vice president at the Rockefeller Foundation, said low- and lower middle-income countries paid twice as much to service debt in 2025 compared to pre-pandemic levels, leaving limited resources for social spending.“This new conflict threatens any recovery that occurred since the pandemic or the Ukraine war, and it takes countries that have basically been treading water, trying to stay away from default, and keeps them in a long term debt-growth-investment trap,” he said.
