Continued rising oil prices could trigger global recession – IMF boss

With Brent crude at US$107 a barrel and no end in sight for the military conflict in Iran, the IMF sees a global recession on the horizon.

The war, which initially was supposed to last four weeks, is now in its fourth month, with gas prices at the pump in the US now in the $4.60 range.

The Managing Director of the IMF, Kristalina Georgieva, is cautioning that if crude were to be in the US$120-US$130 a barrel range into next year, global growth could slow down to 2 per cent, and we could all be living in a world of recession.-like conditions characterised by economic instability.

Jamaica and most of the Caribbean are already experiencing negative impacts. Jamaica, a US$20 billion economy, imports US$2 billion of oil and gas a year.

The state refinery, Petrojam, is already under tremendous pressure with the government taking the decision to remove the weekly $4.50 per litre cap in light of the continuing war in Iran. 

On the rising oil price situation, Georgieva said: “Now if this continues into 2027 and we have oil prices of US$125 more or less, then we have to expect a much worse outcome. Then we are going to see inflation climbing up, and then inevitably inflation expectations would start de-anchoring.”

“What I want to stress is that it is really serious. Don’t throw gasoline on fire. Everybody in this room knows that if you supply shrinks, your demand has to follow.”

The IMF has cut its economic outlook for the world economy. Last month, it predicted that global GDP  would expand by 3.1 per cent this year. Now it says growth will slow to 2.5 per cent this year as a result of the war in the Middle East.