IMF Warns of Prolonged Economic Impact from Israel-Hamas Conflict

The IMF has warned of a long-lasting economic impact in the Middle East and north Africa due to increasing regional instability caused by the Israel-Hamas war. The fund expects the region's growth to be "lacklustre" at 2.6% in 2024, down from its previous forecast of 3.3%. The conflict in Gaza has devastated its economy and has triggered tensions and hostilities across the region. The war has also disrupted maritime trade routes, tourism, and could threaten the region's economic recovery from the Covid-19 crisis. The IMF has highlighted the erosion of stability and increasing risks, warning of a prolonged impact on trade and below-average growth in the region.

Key Takeaways

• The IMF anticipates a decline in economic growth in the Middle East, North Africa, and Pakistan due to regional instability caused by the Israel-Hamas war.
• The conflict has triggered tensions and hostilities across the region, adversely impacting the economies of Gaza and the West Bank.
• Geopolitical risks, such as attacks by Houthi rebels in Yemen and disruptions in maritime trade routes, have clouded investment decisions in the wider region.
• The cost of transporting goods has increased significantly, with the cost of transporting a container from China to the Mediterranean Sea quadrupling since the start of the Gaza war.
• Unemployment rates in the region, particularly among the youth, remain high, and the war could jeopardize the region's economic recovery from the Covid-19 crisis.

Analysis

The Israel-Hamas war's regional instability is projected to cause a significant decline in economic growth for the Middle East, North Africa, and Pakistan. The conflict has triggered tensions and hostilities, adversely impacting the economies of Gaza and the West Bank. Moreover, geopolitical risks, such as attacks by Houthi rebels in Yemen and disruptions in maritime trade routes, have clouded investment decisions in the wider region. This instability has led to a quadrupling in the cost of transporting goods from China to the Mediterranean Sea, disrupting trade. The long-lasting economic impact could exacerbate high unemployment rates, particularly among the youth, and impede the region's recovery from the Covid-19 crisis. Organizations involved in trade, transportation, and investment, as well as the affected countries and their financial instruments, will likely face significant challenges and decreased growth prospects in the short and long term.

Did You Know?

• The cost of transporting goods has increased significantly, with the cost of transporting a container from China to the Mediterranean Sea quadrupling since the start of the Gaza war.
• Unemployment rates in the region, particularly among the youth, remain high, and the war could jeopardize the region's economic recovery from the Covid-19 crisis.
• Geopolitical risks, such as attacks by Houthi rebels in Yemen and disruptions in maritime trade routes, have clouded investment decisions in the wider region.