The International Monetary Fund (IMF) has warned that wars cause lasting economic scars, reducing output by roughly 7% over five years and affecting growth for more than a decade. The IMF's research highlights the devastating human toll of wars as well as their large and prolonged economic costs.
Key Takeaways
The International Monetary Fund (IMF) warns that wars cause lasting economic scars, reducing output by 7% over five years and affecting growth for more than a decade. In 2024, conflicts in over 35 countries impacted about 45% of the world's population. The World Bank predicts slower growth in Europe and Central Asia due to rising energy prices from Middle East conflicts.
- Wars cause an average decline in output of roughly 7% over five years
- Economic scars from wars last more than a decade according to IMF research
- In 2024, more than 35 countries experienced conflict affecting about 45% of the world’s population
- Europe and Central Asia face economic slowdown due to Middle East conflicts
- Global growth projections revised downwards due to ongoing conflicts
In 2024, conflicts in over 35 countries impacted about 45% of the world’s population according to multiple reports. The World Bank also predicts that emerging and developing economies in Europe and Central Asia will experience a sharp economic slowdown this year due to rising energy prices from Middle East conflict.
According to Reuters, growth across the region is expected to slow down significantly by 2026. Countries engaged in foreign conflicts may avert physical destruction on their own soil, but neighboring countries or key trading partners will feel the shock according to TimesLIVE.
The U.S.-Israeli war on Iran has sent Brent crude prices up about 50%, raising the risk of an inflationary spike globally per Reuters. The IMF's managing director Kristalina Georgieva warned that all roads now lead to higher prices and slower growth. She also noted that even a rapid end to hostilities would result in a downward revision of the growth forecast and an upward revision of its inflation forecast.
The World Bank President Ajay Banga said that the impact of the war depends on the severity and duration of disruption to energy markets, with potential impacts ranging from 0.3% to over 1% on global GDP growth according to Reuters. The bond market has also been affected, with the FTSE World Government Bond Index sliding more than 3% in March.
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