In a joint statement on Monday, the International Monetary Fund (IMF) and the World Bank expressed concern about the impact of the ongoing Israel-Hamas war on the global economy. The conflict, which has been raging since October, has already taken a toll on the economy of the Middle East and North Africa region, according to IMF Managing Director Kristalina Georgieva.
Speaking at the World Governments Summit in Dubai, Georgieva highlighted the potential for the conflict’s repercussions to extend globally if the fighting persists. She emphasized the risk of spillover, particularly in the Suez Canal, where Yemen’s Iran-backed Huthi rebels have attacked Red Sea shipping, affecting vital maritime passage.
The Huthis claim to target Israeli-linked shipping in solidarity with Palestinians in Gaza, leading some cargo carriers to opt for longer and more expensive routes to avoid attacks. Last month, the UN Conference on Trade and Development reported a more than 40 percent decline in commercial traffic passing through the Suez Canal.
Georgieva underscored that additional consequences of the conflict could pose further challenges to the global economy. Expressing her personal sentiments, she stated, “As a woman, as a mother, grandmother… I pray for peace.”
The Gaza Strip has faced intense Israeli assault for over four months, initiated in response to an October 7 Hamas attack on southern Israel. The unprecedented attack resulted in approximately 1,160 deaths, mostly civilians. Israel, vowing to dismantle the militant group, launched air strikes and a ground offensive, resulting in at least 28,340 casualties, predominantly women and children, according to the health ministry in the Hamas-run territory.
Despite uncertainties related to the war, Georgieva expressed confidence in the IMF’s belief that the world economy is on track for a “soft landing.” She anticipated interest rates aligning with the direction of inflation by mid-year.
World Bank President Ajay Banga, also addressing the summit, identified the situations in Gaza, challenges in Ukraine, and issues in the Red Sea as significant factors influencing the global economic outlook. Acknowledging these variables, Banga emphasized the need to closely monitor their impact, especially given the current trend of what appears to be the lowest growth in the last 55 years.
