Macroeconomics: Stagflation risks at IMF and World Bank – DBS

DBS Group Research’s Philip Wee argues that stagflation will dominate the agenda at the International Monetary Fund (IMF) and World Bank Spring Meetings following President Trump’s Strait of Hormuz blockade. He expects the IMF’s World Economic Outlook to downgrade global growth and single out Asia as particularly vulnerable due to its dependence on Hormuz-linked industrial inputs.

Stagflation and global exposure to Hormuz

"US President Donald Trump announced a drastic policy shift by ordering the US Navy to start blockading the Strait of Hormuz by interdicting every vessel in international waters that paid a toll to Iran for safe passage in the Strait."

"Trump’s Hormuz blockade also appears to be a maritime compellence campaign that directly rebukes US allies who refused to support the US conflict against Tehran. Trump’s March 17 address characterized NATO and Asian security partners as "free riders" who agreed with the mission but refused to "share the burden.""

"Following the US Supreme Court’s ruling that stripped President Trump of his ability to use the International Emergency Economic Powers Act (IEEPA) for broad-based tariffs, the administration also appears to be weaponizing physical energy security to achieve the same mercantilist ends against its primary trade deficit partners in Europe and Asia. "

"The IMF World Economic Outlook (WEO), to be released on April 14, will likely include a downgrade to global growth, flagging Asia as the most exposed region due to its high dependency on the Strait of Hormuz for industrial inputs."

"Hence, expect stagflation to dominate discussions at this week’s International Monetary Fund and World Bank Spring Meetings in Washington, D.C."

"IMF Managing Director Kristalina Georgieva warned that it would take some time for global prices to come down to levels seen before Operation Epic Fury began on February 27."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)