The surge in oil and LNG prices as a result of the Middle East war is testing the resilience of the global economy once again, IMF Managing Director Kristalina Georgieva said on Friday.
“The world economy has been remarkably resilient. Shock after shock, and yet growth is at 3.3%,” Georgieva told Bloomberg Television in an interview.
“But this resilience is being tested yet again,” the IMF’s top official added.
If energy prices sustain just a 10% increase over a period of one year, this would add 0.4 percentage point to inflation and slow economic growth by 0.1%-0.2%, Georgieva told Bloomberg on the sidelines of the Asia in 2050 Conference in Bangkok, Thailand.
The IMF is already in discussions with the most vulnerable energy importers to potentially assist them financially if energy prices and uncertainty further spike, she said.
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“This conflict, if it proves to be more prolonged, has obvious potential to affect global energy prices, market sentiment, growth, and inflation, placing new demands on policymakers,” Georgieva said at the conference in Thailand on Thursday.
“For most of Asia, what is at stake is energy security and, through that, confidence. Stock markets are already reacting,” the IMF’s Managing Director added.
For example, in South Korea, the world’s best-performing equities market for 2025, volatility hit new highs this week.
The Seoul market saw on Wednesday its biggest-ever crash with selloffs focused on chip makers and technology stocks. Traders are concerned that the escalating war in the Middle East and the surge in oil and gas prices would reignite inflation and slow economic growth rates.
Investors in Asia are dumping technology stocks as they brace for an inflation shock from the surging oil prices that would delay interest rate cuts.
Asia is particularly vulnerable to the current energy shock as most of its top oil and gas buyers, including China, Japan, South Korea, and India, rely on Middle Eastern crude and LNG being transported via the Strait of Hormuz.
By Tsvetana Paraskova for Oilprice.com
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