DUBAI: The International Monetary Fund (IMF) and the World Bank Monday warned that the Gaza war and the related attacks on shipping in the Red Sea pose threats to the global economy.
According to the IMF’s managing director Kristalina Georgieva, the Israel-Hamas war raging since October has already hit the Middle East and North Africa region’s economy.
Its knock-on effects could negatively impact the world the longer the fighting drags on, Georgieva told the World Governments Summit, an annual gathering of political and business leaders in Dubai.
“I fear most a longevity of the conflict because, if it goes on and on, the risk of spillover goes up,” she added.
“Right now, we see a risk of spillover in the Suez Canal,” she said, as Yemen’s Iran-backed Huthi rebels have attacked Red Sea shipping leading to the crucial maritime passage.
The Houthis say they are targeting what they see as maritime traffic linked to Israel in solidarity with Palestinians in Gaza, and are pushing some cargo carriers to take longer and more expensive routes to avoid attacks.
The United Nations Conference on Trade and Development warned late last month that the volume of commercial traffic passing through the Suez Canal had fallen by more than 40 percent in the previous two months.
Georgieva said if there are further “consequences in terms of where the fighting is going, it could be more problematic for the world as a whole”.
On a personal note, she added that “as a woman, as a mother, a grandmother… I pray for peace.”
The Gaza Strip has been under intense Israeli attack for more than four months in retaliation for the October 7 Hamas attack on southern Israel.
The unprecedented attack by Hamas resulted in the deaths of about 1,160 people, mostly civilians, according to AFP statistics based on official Israeli figures.
Israel has vowed to destroy the militant group and has launched airstrikes and a ground offensive that the health ministry says have killed at least 28,340 people, mostly women and children, in Hamas-run territory.
Despite the war-related uncertainties, Georgieva said the IMF is “very confident that the world economy is now poised for this soft landing we have been dreaming of”.
When asked about interest rates being cut in leading economies, she said, “I expect to see by mid-year interest rates going in the direction inflation has been going for the last year now.”
Also speaking at the summit, WB President Ajay Banga said that “what’s going on Gaza, but also the challenges of Ukraine… and the Red Sea” are among the key challenges to the world economic outlook.
When “you add these variables to what is already turning out to be probably the lowest growth of the last 35, 40 years…that’s something we’ve got to keep a close eye on,” he added.
