JOHANNESBURG – The International Monetary Fund (IMF) has warned that the global economy faces recession if the conflict in the Middle East continues—with energy-importing countries like South Africa at even greater risk.
In a report published last week, IMF economists warned that a longer or broader conflict could significantly weaken growth and destabilise financial markets.
In the worst-case scenario, in which supply disruptions persist into next year, the IMF predicts global growth to fall to around 2%.
According to the IMF, this would mean “a close call for a global recession”. Global growth has fallen short of 2% only four times since 1980, it said.
The economists also warned that the war in Iran could have severe consequences far outside the region—especially for energy-importing countries like South Africa.
In a recent interview, Xhanti Payi, economist and director at Inani Strategies, said the recession concerns are not only credible but increasingly likely as global tensions intensify.
He said the threat “is quite real.”
He noted that the global economy is coming off a vulnerable recovery from COVID-19 and is now being hit by fresh shocks, including trade disruptions and geopolitical conflict.
As a result, he cautioned that South Africa is facing a serious downward trend, particularly as new crises emerge around energy and logistics.
“The concern is not just about the war itself, but what it does to oil prices, to inflation, investor confidence, and already fragile growth,” he explained.
He pointed out that global inflation forecasts have worsened significantly, especially for emerging markets.
“There has certainly really actually steepened their forecast for inflation globally, especially those that are vulnerable that don’t have their own sources of fuel,” he said.
Payi also highlighted a critical shift in how markets are interpreting the crisis. What was once seen as temporary is now becoming entrenched.
South Africa at risk
For South Africa and other emerging markets, the risks are even more severe. Payi noted that these economies are heavily dependent on global growth and external investment.
He added that limited fiscal capacity makes it harder to cushion shocks, particularly in critical sectors like agriculture and energy.
At a domestic level, Payi said the key pressure points to watch are fuel and food. He warned that disruptions to fertiliser supply and rising input costs could push inflation higher again.
“These were areas where inflation had been easing, but are now where we are finding the most risk,” he said.
Prior to the outbreak of the conflict, the IMF had forecast South Africa’s GDP growth at 1.4% for 2026. This has now been cut to just 1.0%.
The downgrade reflects a stark turnaround after the country’s fortunes swung in a more positive direction at the end of 2025 and early 2026.
In the January 2025 outlook, the IMF expected South Africa’s economy to grow by 1.5% at the start. However, this tanked to just 1.0% by July as the United States hit global markets with its tariffs.
But even accounting for the hit to global growth, South Africa appears to come off much worse.
The projected growth for South Africa for 2026 is the lowest among emerging markets and developing economies, including Russia, which is at war.
Adding to the pain, the IMF has warned that downside risks dominate its outlook, meaning worse may yet lie ahead.
The key warning for South Africa—which is already struggling to break more than a decade of stagnation—is that the impact on emerging market and developing economies would be almost twice that on advanced economies.
Bloomberg reported that commercial traffic through the Strait of Hormuz is at a virtual standstill on Monday, 20 April, following a brief reopening over the weekend that ended with the first US seizure of an Iranian vessel.
Transits through the waterway have reduced to a trickle over seven weeks of war in the Persian Gulf, as Iran tightens control in retaliation for US and Israeli strikes.
Oil jumped, pushing US stocks and Treasuries lower after a turbulent weekend in the Middle East cast doubt on the prospects for peace talks ahead of a looming ceasefire deadline.
Brent rose 5.4% above $96 a barrel as the US Navy carried out its first seizure of an Iranian vessel in the Strait of Hormuz.
Source: BusinessTech
