Top finance officials from around the world will convene in Washington this week for the IMF and World Bank Spring Meetings under the shadow of the Middle East war, which has delivered what officials describe as a third major shock to the global economy after COVID-19 and Russia’s 2022 invasion of Ukraine.
Senior IMF and World Bank officials said last week they would downgrade global growth forecasts and raise inflation predictions as a result of the conflict, warning that emerging markets and developing countries will be hit hardest by higher energy prices and supply chain disruptions.
The World Bank’s baseline estimate now projects growth in emerging markets and developing economies at 3.65 percent in 2026, down from 4 percent forecast in October. In a worst-case scenario where the war persists, that figure could fall as low as 2.6 percent.
Inflation in those countries is now expected to reach 4.9 percent in 2026, up sharply from the previous estimate of 3 percent, with a worst-case scenario of 6.7 percent.
Sri Lanka context
Sri Lanka’s delegation, led by State Minister Eran Wickramaratne, is attending the meetings as the country navigates a dual macro shock — the Middle East energy crisis and US trade tariffs. The IMF’s 5th and 6th review concluded on April 9 with a $700 million tranche approved, but the Fund has signalled that Sri Lanka must resubmit tariff revisions by June.
The ADB has already warned that the conflict could shave 0.8 percentage points off Sri Lanka’s GDP, while the Trump Hormuz blockade announced today adds fresh uncertainty to global oil markets.
