Don't Underestimate! IMF Reveals 4 Major Threats to the World and Indonesia
The International Monetary Fund (IMF) has issued four important warnings for the global economy in its World Economic Outlook (WEO) Update for July 2026. The four threats stem from the energy sector, monetary policy, fiscal space, and geopolitics. The IMF projects global economic growth at 3.0% in 2026, lower than the 3.5% average recorded in 2024-2025. Despite the global slowdown, the IMF sees Indonesia’s economy as relatively stable, maintaining its growth projection at 5.0% for 2026 and 5.1% for 2027. However, stable projections do not mean global risks can be ignored. External pressures can still enter through various channels, including oil and gas prices, imported inflation, the direction of global interest rates, exchange rate pressures on the rupiah, and the burden of energy subsidies and compensation on the state budget (APBN).
The first warning concerns high energy and food prices. The IMF expects energy prices to remain higher than pre-war levels. The average oil price for 2026 is forecast at around US$89 per barrel, 9% higher than the assumption in the April 2026 WEO report. Natural gas prices are also expected to be higher. Compared to 2025, crude oil prices in 2026 are projected to rise by 32% and natural gas by 22%. This energy pressure spills over into fertiliser prices, which are expected to increase by 26%, and food prices, which are forecast to rise by 8% due to higher energy, fertiliser, and transport costs. This is particularly relevant for Indonesia, as rising oil and gas prices can affect energy import costs, non-subsidised fuel prices, electricity costs, logistics, and the burden of energy subsidies. The IMF also notes that emerging Asia is more sensitive to energy price pressures, with retail petrol prices rising by around 30% since the war began.
The second warning relates to monetary policy. The IMF sees that global inflation has not been fully tamed, with the downward trend stalling. Global inflation is expected to rise from 4.1% in 2025 to 4.7% in 2026, driven by higher energy and food prices. This means central banks cannot ease policy too quickly. The era of high interest rates is expected to last longer, with the US and eurozone likely to maintain relatively high real interest rates.
The third warning concerns fiscal policy. The IMF observes that many countries are using fiscal measures to cushion the impact of the war, such as subsidies, tax cuts, and price controls. The IMF cautions that support must be carefully designed, as overly broad assistance can be expensive, poorly targeted, and difficult to withdraw. It recommends that aid be temporary, targeted at vulnerable groups, and maintain market price signals. This is highly relevant for Indonesia, where rising global energy prices increase pressure on the state budget. The government must balance the need to protect purchasing power with the risk of ballooning energy subsidies and compensation.
The fourth warning is geopolitical. The IMF notes that the most immediate risk to economic projections still comes from developments in the Middle East.