The IMF lowered eurozone and global growth forecasts on Tuesday, as it warned that the Iran war could trigger a “major energy crisis” unless a “durable solution” to the conflict is quickly found.
The Fund said it expects the EU’s 21-country single currency area to expand by 1.1% in 2026, down from the 1.3% expansion previously forecast in January. Lower projections for the US and China, the world’s two largest economies, also led the Fund to cut its global GDP forecast for this year from 3.3% to 3.1%.
The EU’s four largest economies – Germany, France, Italy, and Spain – all had their growth outlooks downgraded, as the surge in oil and gas prices sparked by the US-Israeli attack on Iran in February offset planned increases in government spending, including on defence.
Pierre-Olivier Gourinchas, IMF chief economist, told reporters that the forecasts assume that the Iran war will prove “short-lived” and that energy prices will rise by 19% on average this…
