IMF warns prolonged energy disruption could derail global growth outlook

Christian Mumssen, the International Monetary Fund's director of strategy, warned on Wednesday that a prolonged disruption to energy supplies from the Middle East conflict could alter the fund's projection for 3% global growth in 2026, urging governments to maintain fiscal and monetary credibility in what he called an "exceptionally" uncertain environment.

Energy Risks Loom Over October Forecast

Speaking at the Atlantic Council in Washington on July 15, Mumssen said it was "very difficult to say" where the IMF's October forecast would land when asked whether renewed military strikes in the Middle East would force a revision. He noted that offsetting forces had so far prevented the war from hitting global growth harder, but that "a very long disruption to energy supplies would clearly affect the outlook".globalbankingandfinance+1

The IMF's July World Economic Outlook, released on July 8, projects global growth at 3.0% in 2026 and 3.4% in 2027, down from an average of 3.5% in 2024 and 2025. Headline inflation is expected to rise to 4.7% in 2026 — up 0.3 percentage points from April — driven mainly by higher energy and food prices, before easing to 3.9% in 2027. In April, the fund had offered three scenarios rather than a single baseline, one of which assumed a longer-duration war dragging growth down to just 2%.reuters+2

Credibility in a "Shock-Prone World"

Mumssen, who took over the strategy role in October, framed the current moment as one in which the pandemic, cost-of-living crises, trade frictions, wars in Ukraine and the Middle East, and rapid advances in artificial intelligence are all unfolding simultaneously. "The global economy has proved remarkably resilient in the face of these forces. But the sheer scale of what is under way creates an exceptionally high degree of uncertainty — and we should expect the unexpected," he said.imf+1

He called on governments to preserve "a credible medium-term fiscal framework and a firm commitment to price stability," warning that frequent supply disruptions are likely to continue threatening price stability. The IMF is conducting five major policy reviews, including how it structures loans and assesses economies, with greater emphasis on contingency planning.globalbankingandfinance

Fragmentation Meets Transformation

Mumssen acknowledged that the forces shaping the global economy are pulling in opposite directions — the Middle East war shock weighing on energy-importing nations, while AI-driven technology offers a potential boost to productivity. Growth in the Middle East and Central Asia is projected to plunge to 0.7% in 2026 before rebounding to 6.5% in 2027, underscoring the asymmetric impact of the conflict.industrialinfo+2

"Just when massive structural challenges and a new technological revolution would call for greater international cooperation, the global governance system is fragmenting," Mumssen said.globalbankingandfinance