IMF Worried Inflation Will Be Higher If Middle East Conflict Heats Up

Illustration (Photo: Doc. ANTARA)

JAKARTA - The International Monetary Fund (IMF) estimates global growth of 3.2 percent in 2024 and 2025.

This was stated in the World Economic Outlook report, although inflation and geopolitical risks remain a threat to the world economy.

"This figure shows an increase of 0.3 percent from the IMF projection in October for 2024, with activities that are stronger than expected in the US, China, and other major developing countries. market. But activity in the Euro region has weakened," said IMF Chief Economist Pierre Olivier Gourunchas in his statement, Wednesday, April 17.

Gourunchas said the global economy continues to show extraordinary resilience, with stable growth and declining inflation. However, there are still many challenges facing it.

According to Gourunchas, concerns over inflation and the economic impact of instability in the Middle East and the war in Ukraine on the world economy are the main things.

The progress towards the inflation target is somewhat worrying because it has stalled since the beginning of the year in several countries. This may be a temporary setback, but there is reason to remain vigilant," he explained.

Gourunchas said oil prices had increased in part due to geopolitical tensions and the service sector.

Inflation is still very high in many countries. Further trade restrictions can also encourage goods inflation.

"Returning inflation to a target must remain a priority," said Gourunchas.

On the other hand, the market is wondering when or whether the US Federal Reserve will start lowering its interest rates after the latest economic data shows the strong American economy.

The recent strong performance of the United States reflects productivity growth and strong labor supply growth, but also strong demand pressure that could increase inflation.

"This requires a careful and gradual approach to the easing carried out by the Federal Reserve," said Gourunchas.

Therefore, the IMF urges countries to address this by rebuilding their fiscal buffers.

However, this sometimes does not please politically in the short term.

Fiscal consolidation is never easy, but the best thing is not to wait until the market determines its condition. Credible fiscal consolidation can help reduce funding costs, improve fiscal space, and financial stability. The key is to start early, gradual and credible," he said.