US$50 Bln In Financial Support Needed As West Asia Conflict Tests Global Economy - IMF

BUSINESS

KUALA LUMPUR, April 10 (Bernama) -- The global economy is facing renewed strain from the ongoing conflict in West Asia, with up to US$50 billion (US$1 = RM3.98) in financial support potentially needed to help vulnerable countries weather the shock, according to the International Monetary Fund (IMF).

Managing director Kristalina Georgieva said the war has triggered a large, global, and uneven supply shock, disrupting energy flows, pushing up prices, and straining supply chains worldwide. 

She said oil and liquefied natural gas (LNG) supplies have been significantly affected, contributing to higher inflation and economic uncertainty across the globe.

She cited as an example Qatar's Ras Laffan complex, noting that it is a “tremendously important” example of strategic investment done right and producer of 93 per cent of the Gulf's LNG, some 80 per cent of it going to Asia-Pacific, a region that now endures serious fuel shortages.

“Ras Laffan has essentially been shut since March 2, took direct hits on March 19, and could take three to five years to restore to full capacity," she said in Washington on Thursday.

She said the impact is being felt most acutely by oil-importing nations and those with limited fiscal capacity, while even energy exporters are not immune to rising costs and broader economic disruptions.

The fund also expects global growth to slow under all scenarios, even if conditions improve, citing infrastructure damage, supply interruptions, and weakened confidence as key factors weighing on the outlook.

To address the crisis, the IMF estimates that demand for balance-of-payments support could rise between US$20 billion and US$50 billion in the near term, with the lower end of the range dependent on the durability of a ceasefire.

“Two points worth noting here. One, this range would be much higher were it not for the sound policymaking of many emerging market economies -- including some of the largest ones -- over the decades. And two, we are well resourced to meet this shock," she said.

Georgieva advised policymakers to respond cautiously, avoiding measures that could worsen global conditions, while focusing on targeted support for vulnerable populations and maintaining price stability.

The IMF also emphasised the importance of strong economic fundamentals and policy discipline, noting that countries with greater fiscal space and resilience are better positioned to manage the shock.

“Policymakers can help in multiple ways, and—certainly—they must be careful not to make things worse. So here I appeal to all countries to reject go-it-alone actions—export controls, price controls, and so on—that can further upset global conditions: don’t pour gasoline on the fire,” she said.

Despite the crisis, there's a silver lining. Georgieva said there is some upside with countries reshaping their relations and seeing more new opportunities.

"For example, take ASEAN. Trade within ASEAN is around 20 per cent. In comparison, trade within the Europian Union was 60 per cent. So, why are these countries not trading more with each other? And that is something that they're reflecting on. And we would like to help them to build not only more vibrant trade relations, but also to think about their collective strength and put it in place.

"Same applies to the Gulf. Countries in the Gulf actually have been working robustly on coordinating their reforms, improving their interconnectivity until this war affected them. But I'm sure this would be a longer term trend in the Gulf.

"And I think people like you, we probably should create a club of optimists. We need to recognize that a changing world is also a world in which unthinkable opportunities are presenting themselves, not only challenges. Yes, we have to care about the challenges as well, but hey, seek opportunities, grab them," she said.

The upcoming IMF Spring Meetings, she said, will focus on coordinating global responses to mitigate the economic fallout and support recovery efforts amid ongoing uncertainty.

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