IMF Warns of Economic Impact of Israel-Hamas War in Middle East
The International Monetary Fund (IMF) has issued a dire warning regarding the escalating regional instability caused by the ongoing conflict between Israel and Hamas. In a recent regional economic assessment report, the IMF projected a sluggish growth rate of 2.6% for the Middle East, north Africa, and Pakistan in 2024, down from its previous forecast of 3.3%.
IMF Managing Director Kristalina Georgieva emphasized the lingering uncertainty stemming from Israel’s conflict with Hamas in Gaza, as well as the looming threat of a broader regional confrontation involving Iran and its proxy forces. The fund highlighted that despite initial post-pandemic recovery in oil-rich Gulf states and other regional economies, the outbreak of hostilities in Gaza has reignited tensions across the Middle East.
The devastating impact of the conflict is evident, with Hamas’s attack on Israel on October 7 resulting in a significant death toll, prompting a fierce retaliatory offensive by Israel in Gaza. This has left the besieged strip in ruins, while economic activity in the West Bank has also been severely disrupted. Georgieva described Gaza’s economy as being more than 80% decimated, with the West Bank suffering similar consequences.
The ripple effect of the conflict has extended regionally, with Iran launching direct attacks on Israel in retaliation for alleged Israeli strikes in Syria. The heightened geopolitical risks have clouded investment decisions throughout the wider region, while Houthi rebel attacks on ships in the Red Sea have disrupted maritime trade routes. Consequently, traffic through the Suez Canal, a vital revenue source for Egypt, has plummeted.
The IMF noted a significant increase in transportation costs, as the price of shipping a container from China to the Mediterranean Sea quadrupled since the onset of the Gaza conflict. Tourism has also taken a hit, with travelers canceling trips to neighboring countries like Jordan and Lebanon.
Despite some resilience displayed by the economies of Jordan and Egypt, there are stark divergences between resource-poor Middle East nations and wealthy Gulf oil exporters. While efforts to diversify revenue streams have been made by countries like Saudi Arabia and the United Arab Emirates, voluntary oil production cuts and lower oil prices have impeded overall economic growth, according to the IMF.
IMF officials underscored the precarious situation, highlighting the region’s high levels of youth unemployment and below-average economic growth. The ongoing conflict risks derailing the region’s fragile economic recovery from the COVID-19 pandemic. With growth in the region already at a modest 1.6% last year, the IMF cautioned that the path to recovery remained fragile and uncertain.
Georgieva called attention to the dire situations in Sudan and Yemen, noting that the prevailing conflicts in places like Ukraine and Gaza had overshadowed the suffering experienced in these countries. Despite the challenges, she stressed that the IMF remained committed to providing support and assistance to these nations in need.
