Gaza war, Red Sea attacks dangerous for global economy, warn IMF, World Bank

The Israel-Hamas war, raging since October, has already hit the Middle East and North Africa region’s economy, says IMF

The ongoing Israel-Gaza conflict and the related attacks on shipping through the Red Sea are imperiling the global economy.

The Israel-Hamas war, raging since October, has already hit the Middle East and North Africa region’s economy, said the International Monetary Fund’s managing director Kristalina Georgieva.

Its knock-on effects could impact the world the more extended the fighting drags on, Georgieva told the World Governments Summit, an annual gathering of business and political 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 said.

“Right now, we see a risk of spillover in the Suez Canal,” she said, as Yemen’s Iran-backed Houthi rebels have attacked Red Sea shipping leading to the crucial maritime passage.

The Houthis say they are targeting what they consider Israeli-linked shipping in solidarity with Palestinians in Gaza, pushing some cargo carriers to take longer and more expensive routes to avoid attacks.

The U.N. Conference on Trade and Development warned late last month that commercial traffic passing through the Suez Canal had fallen more than 40% in the previous two months.

Georgieva said that if there are other “consequences regarding where the fighting goes, it could be more problematic for the “world as a whole.”

On a personal note, she added that “as a woman, as a mother, grandmother… I pray for peace.”

The Gaza Strip has been under intense Israeli assault for over four months in retaliation for the Oct. 7 Hamas attack on southern Israel.

Hamas’s unprecedented attack resulted in the deaths of about 1,160 people, mostly civilians, according to an AFP tally based on official Israeli figures.

Israel vowed to destroy the militant group and launched air strikes and a ground offensive that have killed at least 28,340 people, primarily women and children, according to the health ministry in the 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.”

“I expect to see by mid-year interest rates going in the direction inflation has been going for the last year now,” she said when asked about interest rates being cut in leading economies.

Also speaking at the summit, World Bank President Ajay Banga said that “what’s going on Gaza, but also the challenges of Ukraine… and the Red Sea” are among the top challenges to the global economic outlook.

“When you add these variables to what is already turning out to be probably the lowest growth of the last 55 years…. that’s something we have to keep a close eye on,” he said.

Source: AFP

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