'War in Gaza and attacks in the Red Sea endanger the world economy'

The World Bank and IMF issued warnings about the potential threats to the world economy posed by the Gaza conflict and the ensuing attacks on ships traveling through the Red Sea. The economy of the Middle East and North Africa has already been impacted by the Israel-Hamas conflict, which has been going on since October, according to Kristalina Georgieva, managing director of the International Monetary Fund. The longer the fighting continues, the more effects it could have on the world, Georgieva warned the World Governments Summit, an annual event in Dubai that brings together political and business leaders. “I fear most a longevity of the conflict because, if it goes on and on, the risk of spillover goes up,” she stated. “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 Huthis 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 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 Gaza Strip has been under intense Israeli assault for over four months, in retaliation for the October 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, mostly 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 35, 40 years…that’s something we’ve got to keep a close eye on,” he said. (with inputs from AFP)