April 17, 2026 | 04:01 pm
TEMPO.CO, Jakarta - The International Monetary Fund (IMF) has warned that the European Union may be entering a recession, with inflation reaching nearly 5 percent due to the conflict in the Middle East.
"In a more severe scenario as described in the World Economic Outlook—a persistent supply shock compounded by tightening financial conditions—the EU could come close to recession with inflation approaching 5 percent," said Alfred Kammer, Head of the IMF's European Department, on Friday, April 17, as quoted by Antara. He emphasized that no European country would be immune to the impact.
Amid rising near-term inflation expectations, the IMF also expects the European Central Bank to raise its benchmark interest rate by 50 basis points by the end of 2026.
According to Kammer, the policy response may change based on developments in the global energy market and the state of the euro area economy in the coming weeks.
He said that with eurozone inflation close to the target level and medium-term expectations relatively stable, the European Central Bank has time to monitor the impact of the conflict before taking further action.
According to Kammer, the main impact of the conflict on the EU would be rising energy prices. "Industrial energy prices in the EU are now roughly double their pre-2022 levels and substantially higher than those in the U.S.," he said.
He added that this condition was caused by the region's dependence on energy imports and the fragmentation of its energy market.
The IMF assesses that the UK needs to maintain a tight monetary policy to contain inflationary pressures. The IMF lowered its projections for UK economic growth in 2026 more sharply than for any other G7 country. The country's inflation rate is expected to reach 3.2 percent this year.
British Chancellor of the Exchequer Rachel Reeves said that the escalation of the conflict in the Middle East poses significant challenges for her country.
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