The war has caused a series of shocks that will slow the pace of economic recovery and the fight against inflation. The World Bank now expects emerging markets and developing economies to grow by 3.65% in 2026, down from the 4% it forecast last October. However, it expects this rate to fall to 2.6% if the war continues for a longer period. Inflation in these countries is expected to reach 4.9% in 2026, up from the previous estimate of 3%, and could reach 6.7% in the worst-case scenario. Last week, the IMF warned that another 45 million people may also face acute food insecurity if the war continues and continues to disrupt the necessary fertilizer shipments. The IMF and World Bank are racing to respond to the crisis and support weaker countries as public debt levels have reached record highs and budgets are limited. The IMF expects demand for short-term emergency support to range from $20 billion to $50 billion for low-income, energy-importing countries. Economists are urging governments to use only targeted, temporary measures to alleviate their citizens' suffering from rising prices, as broader measures could increase inflation. World Bank President Ajay Banga, praising efforts in financial and monetary controls that helped economies past crises, said, "Leadership is important, we have overcome crises in the past... but this is a shock to the system." Countries now face the difficult task of balancing inflation management, monitoring growth, and the long-term challenge of creating enough jobs for the 1.2 billion people who will reach working age in developing countries by 2035. The IMF and World Bank also face a completely different global landscape, with mounting tensions between the US and China, the world's two largest economies, and the G20 struggling to coordinate its response. The US, currently chairing the G20, which also includes Russia and China, excluded another member country, South Africa, from participating in the meetings, complicating the group's ability to coordinate on this crisis. Josh Lipsky, head of international economics at the Atlantic Council, said the situation is like "trying to operate on consensus when there is no consensus in the world right now on anything." Lipsky added that comments from the IMF, World Bank, and other multilateral lenders about being ready to support countries hardest hit by the war are clearly aimed at reassuring markets. He said, "It's a message to private creditors. These countries will get support from multilateral development banks and international financial institutions. This won't be like the COVID-19 pandemic; it's something we can handle." Mary Svenstrup, a former senior US Treasury official now at the Center for Global Development, said many emerging market and developing economies entered the crisis in a worse position than just a few years ago, with dwindling buffers, rising debt risks, and falling reserves. She said, "This crisis should be a catalyst for stakeholders at the IMF to really rethink how the fund supports weaker countries, realizing that we will see more global shocks." She added, "We can't ask them to sacrifice growth and development to rebuild buffers." Svenstrup noted that countries should implement more ambitious reforms if they get new money. Inflation in these countries is expected to reach 4.9% in 2026, up from the previous estimate of 3%, and could reach 6.7% in the worst-case scenario. Last week, the IMF warned that another 45 million people may also face acute food insecurity if the war continues and continues to disrupt the necessary fertilizer shipments. The IMF and World Bank are racing to respond to the crisis and support weaker countries as public debt levels have reached record highs and budgets are limited. The IMF expects demand for short-term emergency support to range from $20 billion to $50 billion for low-income, energy-importing countries. This is not the time to flee from countries with financial problems. 4.9% inflation and 3.6% growth in emerging markets in 2026. 'World Bank': to raise $70 billion in 6 months to help. 'IMF': $50 billion for low-income, energy-importing countries.
