The Macroeconomics of War and Recovery study examined 194 countries between 1946 and 2024, covering 170 conflict onsets and 158 conflict endings.
Economies directly affected by conflict typically suffer an immediate output contraction of about 3%, with cumulative losses reaching roughly 7% within five years. Losses can deepen to about 11% after 10 years.
Major conflicts cause the greatest economic losses, while even lower-intensity conflicts produce damage comparable to currency crises. Internal conflicts also tend to inflict more persistent damage than conflicts between countries.
The findings carry particular relevance for Africa, where countries including Sudan, South Sudan, Mali, Burkina Faso, Ethiopia, Mozambique, Nigeria and the Democratic Republic of Congo continue facing conflict or insecurity.
War weakens economies through declining investment, private consumption, exports and foreign financing. Five years after conflict begins, investment typically falls by about 16%, private consumption by nearly 13% and exports by 20%.
Capital outflows and declining foreign direct investment place further pressure on foreign currency reserves. Governments frequently respond by tightening capital controls, increasing interest rates and relying more heavily on aid or concessional financing.
Consumer prices rise to about 35% above pre-conflict levels after five years, while the difference between official and parallel exchange rates almost doubles.
Economic damage also spreads across borders. Neighbouring countries and major trading partners generally experience output losses of about 1% or less during the first two years of a major conflict.
Recovery after conflict remains slow and depends heavily on sustained peace. Where peace lasts, output rises by about 3.8% over five years, reversing only about half of the losses recorded during conflict.
Countries returning to conflict within five years generally experience no meaningful recovery.
Post-conflict growth is mainly driven by workers returning to employment rather than investment or productivity improvements. Financially stronger and export-oriented businesses recover faster, while weaker companies face persistent difficulties rebuilding capital.
The study concludes that ending hostilities alone cannot restore sustainable growth. Durable peace, access to finance, investor confidence and rebuilding productive capacity remain essential for lasting economic recovery.
–IMF/ChannelAfrica–
