The International Monetary Fund (IMF) has warned that armed conflicts are becoming one of the greatest threats to the global economy, with wars now causing deeper and longer-lasting economic damage than financial crises and major natural disasters.
In its latest World Economic Outlook report, the IMF said rising geopolitical tensions and violent conflicts are reshaping economic growth, worsening debt pressures and increasing financial instability across both advanced and developing countries.
The report, titled Macroeconomics of Conflicts and Recovery, revealed that the number of active conflicts around the world has risen to levels not seen since the years following World War II. Most of these conflicts are internal wars and civil unrest.
According to the IMF, more than 35 countries experienced conflict in 2024, while nearly half of the world’s population lived in economies directly or indirectly affected by instability.
The Fund explained that economies caught in conflict suffer sharp declines in production and growth, with economic output falling significantly at the start of wars and losses reaching nearly 7 percent within five years. In many cases, the economic effects continue to be felt for more than a decade.
“Conflicts generate large and persistent output losses in conflict-site economies and spillovers to other countries,” the IMF stated in the report.
The IMF noted that wars disrupt production, weaken institutions, destroy infrastructure and trigger inflation through supply shortages and currency depreciation. Businesses reduce investment, households cut spending and governments are forced to divert resources toward military operations and emergency interventions.
At the same time, export activities decline, foreign direct investment weakens and governments face mounting fiscal pressure as tax revenues fall and debt burdens rise.
Beyond the countries directly involved in conflicts, the IMF said neighbouring economies and key trading partners also suffer from slower growth due to disrupted trade, refugee pressures and growing investor uncertainty.
The report further warned that many wartime economies experience rapid depletion of foreign reserves and increased exchange rate volatility, pushing governments to depend on emergency borrowing, capital controls and monetary financing to stabilise their economies.
According to the IMF, the long-term effects of war go beyond economic indicators. Conflicts leave lasting damage on labour markets, productivity, healthcare systems, education and overall human capital development.
The report added that people exposed to war often suffer long-term psychological stress, poorer health conditions and weaker cognitive performance.
With geopolitical tensions continuing to rise globally, the IMF cautioned that prolonged instability could become a major obstacle to global economic growth in the coming years.
The warning comes at a time when defence spending is increasing sharply across several regions amid growing security concerns and geopolitical rivalries.
