Brooks was answering an Ahram Online question at the WEO's hybrid launch briefing, where she was asked to explain what was driving the Fund's decision to cut Egypt's GDP growth outlook for both 2026 and 2027.
Brooks said Egypt, like other energy-importing economies, is being negatively affected by recent developments, as higher oil prices are expected to reduce real incomes, dampen household consumption, and increase uncertainty, thereby weighing on investment.
She added that the downgrade applies not only to 2026 but also extends into 2027, reflecting a more persistent drag from external shocks.
A high-level Egyptian delegation is participating in the IMF/World Bank Group Spring Meetings, which kick off this week in Washington DC. The delegation is anticipated to hold discussions on the remaining two reviews under the country’s Extended Fund Facility (EFF) loan program, scheduled for 15 September and 15 December.
Conflict implications vary in MENA
On the broader Middle East and North Africa (MENA) region, Pierre-Olivier Gourinchas, Director of the IMF’s Research Department, said the impact of the conflict varies significantly across countries and can be grouped into three broad categories.
Gourinchas was responding to an Ahram Online question on the projected effects of the ongoing regional conflict on the region's energy-importing nations.
He explained that conflict-affected countries, including several energy exporters, are facing the most severe impact, as proximity to or direct exposure to war conditions is driving sharp downgrades, with some economies potentially experiencing negative growth.
A second group of energy-exporting countries outside the conflict zones may benefit from higher energy prices, although their populations could still face pressures from rising domestic energy costs and, over time, higher food prices.
The third group, energy-importing countries, are being hit through higher costs of imported energy, transport, and potentially food, mirroring pressures seen in other regions of the global economy.
Gourinchas also warned that an adverse scenario, one involving higher and more persistent energy prices than in the baseline forecast, would deepen the regional impact considerably.
While the Fund expects disruptions to remain relatively short-lived, with oil prices normalizing around $75 per barrel in 2027, he warned that a more severe shock would significantly amplify regional economic strain.
ME war pushes energy prices higher
Globally, Gourinchas noted that despite a strong start to last year – marked by private sector resilience, easing trade pressures, fiscal support in several economies, and a global tech-driven expansion – this momentum has been abruptly halted by the war in the Middle East.
He said the private sector had successfully adapted to a shifting global business environment, allowing growth to remain resilient and initially supporting expectations of an upgrade to global forecasts heading into 2026.
However, globally, Gourinchas warned that the escalation of conflict, including the closure of the Strait of Hormuz and reported damage to critical energy infrastructure across the Middle East, has significantly raised the risk of a broader energy crisis if a durable resolution is not reached soon.
As a result, oil and gas prices have surged, alongside sharp increases in diesel and jet fuel costs, as well as prices for key industrial inputs such as fertilisers, aluminium, and helium.
Globally, Gourinchas said the global impact is transmitted through three main channels. First, higher commodity prices act as a negative supply shock, raising production costs, disrupting supply chains, and eroding household purchasing power.
Second, these effects risk being amplified if firms and workers attempt to recover losses, potentially triggering wage-price spirals where inflation expectations are weakly anchored. Third, financial conditions may tighten as asset valuations decline, risk premia rise, capital flows reverse, and the US dollar strengthens, further weighing on global demand.
“Under its reference scenario, which assumes a short-lived conflict and a moderate 19 percent increase in energy prices in 2026, the IMF projects global growth at 3.1 percent this year, down from its previous January forecast, with headline inflation rising to 4.4 percent,” according to Gourinchas.
In a more adverse scenario, where disruptions persist and financial conditions tighten further, global growth is projected to slow to 2.5 percent, with inflation climbing to 5.4 percent.
A severe downside scenario assumes prolonged energy supply disruptions extending into next year, generating broader macroeconomic instability. In this case, global growth falls to two percent this year and remains at that level next year, while inflation exceeds six percent.
Gourinchas stressed that the impact of the shock will be uneven across countries. Low-income energy importers are particularly exposed due to pre-existing vulnerabilities and limited policy buffers, while the most severe damage is expected in Gulf economies directly affected by the war fallout.
He also noted that while the current shock shares similarities with the 2022 global commodity price surge, the macroeconomic backdrop is different, with weaker underlying demand pressures but still elevated inflation in some advanced economies, suggesting a more uncertain disinflation path ahead.
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