News

The IMF Spring 2026 World Economic Outlook at CERGE-EI

5 May, 2026

CERGE-EI was pleased to invite you to a seminar featuring Hippolyte Weneyam Balima from the IMF’s World Economic Outlook team in Washington, DC, who presented two analytical chapters from the Spring 2026 World Economic Outlook: the macroeconomic trade-offs of the global surge in defense spending and the macroeconomics of conflict and the challenging road to recovery.

The session explored the macroeconomic trade-offs of the global surge in defense spending, a trend driven by intensifying geopolitical tensions and commitments such as the NATO target to reach 5% of GDP by 2035. The findings revealed that while defense buildups could provide a short-term boost to economic activity, they were predominantly financed through higher deficits, leading to a typical increase in public debt of 7 percentage points of GDP within three years of a buildup's onset. The seminar specifically addressed the “guns versus butter” trade-off, examining how the prioritization of military outlays—particularly in wartime—often resulted in a substantial crowding out of real social spending on health, education, and social protection.

The second part of the presentation examined the macroeconomics of conflict and the challenging road to recovery, noting that active wars had reached levels not seen since the end of World War II. Evidence was presented showing that the average conflict-site economy suffered a 7% cumulative output loss over five years, leaving long-lasting scars on capital stock, employment, and productivity. Crucially, the seminar outlined the pillars of successful recovery, focusing on the vital roles of early macroeconomic stabilization, decisive debt restructuring, and international support in preventing relapses into conflict and facilitating the return of displaced populations.

We were pleased to welcome participants to this seminar and to the discussion on these highly consequential issues at the intersection of macroeconomics, fiscal policy, conflict, and recovery.