World Bank, IMF Sound Alarm Over Gaza War's Economic Fallout

On Monday, the World Bank and IMF issued warnings about the threats posed to the global economy by the Gaza war and the ensuing attacks against shipping freight via the Red Sea. According to Kristalina Georgieva, Managing Director of the International Monetary Fund, the ongoing Israel-Hamas conflict since October has already impacted the economy of the Middle East and North Africa region.

Georgieva stated at the World Governments Summit, an annual event of business and political leaders in Dubai, that the prolonged duration of the conflict could have cascading repercussions that affect the global community, as per a report by AFP.

She said, "I fear most a longevity of the conflict because, if it goes on and on, the risk of spillover goes up."

In solidarity with Palestinians in Gaza, the Houthis assert they are targeting shipping they deem to be affiliated with Israel. This has prompted certain cargo carriers to opt for longer and costlier routes to evade attacks.

In the preceding month, the United Nations Conference on Trade and Development cautioned that the amount of commercial traffic transiting the Suez Canal had witnessed a decline exceeding 40 per cent over the past two months.

Georgieva expressed optimism regarding the global economy despite uncertainties related to the war, stating that the IMF is confident in achieving the soft landing they anticipated. When questioned about interest rate reductions in major economies, she expects interest rates to align with the inflation trend observed over the past year, likely decreasing by mid-year.

"I expect to see by mid-year interest rates going in the direction inflation has been going for the last year now," she said.