A sign for the International Monetary Fund outside its headquarters in Washington, DC, US. (Photo: EPA-EFE / Jim Lo Scalzo) | South African flag. (Photo: EPA-EFE / Nic Bothma) | Businessman in panic. (Photo: iStock) The number crunchers at the International Monetary Fund (IMF) have had sleepless nights of late because of the Iran war, and in the fund’s latest World Economic Outlook (WEO) it outlines three broad scenarios for the global economy.
None of them are good, and the worst-case one sees “a close call for a global recession”. And the IMF slashed South Africa’s growth forecast for 2026 by 0.4 percentage points to 1.0%.
The report underscores the stark fact that the current trajectory of the global economy hinges on the conflict unleashed on 28 February 2026 by the US and Israel. Few wars have ever had such an earth-shaking impact on markets worldwide in such a short span of time.
And because the goal posts are constantly changing, the IMF’s latest World Economic Outlook represents a “reference forecast” – which effectively means it needs to constantly reassess its projections in the face of a US president who threatens to wipe a civilisation from the face of the Earth one day before reverting to his usual Taco stance.
“... this WEO report presents a ‘reference forecast’ – in lieu of the traditional baseline – predicated on the assumption that the war will have limited duration, intensity and scope, such that the disruptions will fade by mid-2026, consistent with commodity futures prices as of 10 March”, the report says.
Ancient history
Commodity futures on 10 March now seem like ancient history, like the price of spice or slaves being shipped through the Strait of Hormuz when Alexander the Great faced off against the Persian King Darius in 331 BCE.
To wit, the IMF now sees global economic growth of 3.1% for 2026, a 0.2 percentage point cut from its previous forecast. But absent the war, the forecast would have been revised up 0.1 percentage point so it is effectively a 0.3 percentage point slash. Global inflation is seen picking up pace to 4.4%, a slight upward revision.
It all depends on how long the conflict lasts, and if it escalates further.
“Under an adverse scenario with larger and more persistent increases in energy prices, global growth would slow further to 2.5 percent in 2026, and inflation would reach 5.4%,” the IMF says.
“Under a more severe scenario in which there is more damage to energy infrastructure in the conflict region, the impact would be even larger: Global growth would be cut to only about 2% in 2026, while headline inflation would be just above 6% by 2027.”
And this raises the spectre of the “R” word.
“This would mean a close call for a global recession (growth rate below 2%), which has happened only four times since 1980, with the latest two occasions corresponding to the global financial crisis and the Covid-19 pandemic,” the World Economic Outlook says.
So it boils down to bad, worse and WTF?
And the IMF pointedly notes that: “The impact on emerging market and developing economies would be almost twice that on advanced economies.”
That would include Mzansi. Having pruned SA’s 2026 economic growth forecast to 1.0% from 1.4%, the IMF would no doubt pull out a chainsaw in the event of the worse and WTF scenarios.
Beyond these scenarios, it’s Apocalypse Now. DM