IMF, World Bank ring economic warning bells over Gaza war, Red Sea attacks

International Monetary Fund’s managing director tells World Governments Summit that Middle Eastern, North African economies have already been affected

International Monetary Fund (IMF) Managing Director Kristalina Georgieva (R) speaks during the World Governments Summit in Dubai on February 12, 2024. (Photo by RYAN LIM / AFP)
International Monetary Fund (IMF) Managing Director Kristalina Georgieva (R) speaks during the World Governments Summit in Dubai on February 12, 2024. (Photo by RYAN LIM / AFP)

The Israel-Hamas war raging since October has already hit the regional economy in the Middle East and North Africa, and could threaten global financial security, the IMF and World Bank warned on Monday.

Amid attacks on shipping through the Red Sea related to the war, the knock-on effects of the fighting could impact the world the longer it drags on, International Monetary Fund’s managing director Kristalina 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 lanes 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.

This photo provided by the Indian Navy shows US-owned ship Genco Picardy that came under attack Wednesday from a bomb-carrying drone launched by Yemen’s Houthi rebels in the Gulf of Aden, January 18, 2024. (Indian Navy via AP, FIle)

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

Georgieva said that if there are other “consequences in terms of 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 war in Gaza has been going on for four months since October 7 when Hamas terrorists attacked southern Israel, murdering some 1,200 people, mostly civilians, and kidnapping 253.

Israel vowed to destroy the terrorist organization and launched airstrikes and a ground offensive that the Hamas-run health ministry in Gaza claims have killed at least 28,340 people. The number, which does not differentiate between civilians and combatants, cannot be independently verified.

Palestinians inspect the damage to residential buildings where two Israeli hostages were reportedly held before being rescued during an operation by Israeli security forces in Rafah, southern Gaza Strip, February 12, 2024. (AP Photo/Fatima Shbair)

The IDF says it has killed over 10,000 terrorists in Gaza, in addition to some 1,000 who were killed inside Israel on and immediately following October 7.

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.

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