Julie Kozack, director of communications at the International Monetary Fund (IMF), commented on the broader global economy and the impact of the conflict in the Middle East during a briefing on recent international developments.
Kozack said the conflict had once again tested the resilience of the global economy and reiterated that the IMF continues to assess developments through three main transmission channels: commodity prices, particularly oil; second-round effects on inflation and inflation expectations; and financial conditions. She added that countries that are net energy importers and have limited fiscal or foreign exchange buffers remain the most vulnerable to the economic consequences of higher energy prices.
Commodity markets recover but normalization will take time
Discussing recent commodity market developments, Kozack said oil prices have fallen from their recent peaks and are now approximately 10 percent above pre-war levels. She added that prices for natural gas, jet fuel, base metals, urea and several fertilizer products have also declined.
However, Kozack cautioned that a full normalization of commodity markets will take time because shipping routes and supply chains need time to recover following the reopening of the Strait of Hormuz under the memorandum of understanding between the US and Iran regarding the reinstatement of peace between the parties. According to Kozack, the outlook also depends on the durability of the current ceasefire.
IMF to update global outlook in July
Kozack said inflation expectations have generally remained well anchored despite recent shocks, although several central banks have tightened monetary policy while others have kept interest rates unchanged. She added that financial conditions have remained supportive, with relatively low sovereign spreads allowing many emerging and developing economies to continue accessing international capital markets.
The IMF will publish a comprehensive reassessment of the global economic outlook, including updated forecasts, in its World Economic Outlook Update on July 8.