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The IMF has warned that the war between Israel and Hamas is likely to have a lasting impact on the Middle East and North Africa, as its director general said Gaza’s economy had been “wiped out”.
In its latest regional economic assessment, the Fund said it expects “lackluster” growth of 2.6% in the Middle East, North Africa region and Pakistan in 2024, down from 3.3% in its previous forecast .
Kristalina Georgieva, head of the IMF, blamed “uncertainty” triggered by political unrest.
“Gaza’s economy is wiped out, more than 80% of it is gone. The West Bank is also seriously affected,” he said during a speech in Washington on Thursday.
The Middle East was one of the bright spots of the global economy in the immediate aftermath of the pandemic, but that optimism reversed last year.
The Hamas attack on Israel on October 7 killed 1,200 people, according to Israeli officials, and triggered the war in Gaza that has killed more than 33,000 people, according to Palestinian officials.
The conflict has spread across the region, with Iran launching its first direct attack on Israel this weekend in retaliation for an Israeli attack on the Iranian consulate in Syria.
Tourism in the Levant has been hit hard by the war, with travelers canceling trips to neighboring countries such as Jordan and Lebanon, while heightened geopolitical risk has clouded investment decisions in the wider region.
Houthi rebel attacks on shipping in the Red Sea have disrupted trade routes and traffic through the Suez Canal – a significant source of revenue for Egypt – has collapsed.
The International Monetary Fund estimates that the cost of transporting a container from China to the Mediterranean Sea has quadrupled from $1,000 to $4,000 since the start of the Gaza war.
Georgieva said the economies of Jordan and Egypt had proven more resilient than Lebanon’s, although both had received additional financial assistance from the IMF.
There is a clear divergence between the more fragile nations of the Middle East and the rich oil exporters of the Gulf, which are more insulated from shocks than their neighbors.
While non-oil economic activity is rising as countries like Saudi Arabia and the United Arab Emirates diversify their revenues, voluntary oil cuts and lower oil prices have slowed their economic growth in real terms this year , the IMF said.
“The real problem is the erosion of stability, and this level of increasing risks could jeopardize the medium-term outlook for the region,” Jihad Azour, director of the IMF’s Middle East and Central Asia department, told the Financial Times. stating that the disruption of trade could have a prolonged impact.
He warned that unemployment levels are “still high among youth in the region, among the highest globally”, while growth is “below historical average”.
The war could also threaten the region’s economic recovery from the Covid-19 crisis, the IMF said. Growth in the region was 1.6% last year, according to the Fund, after Covid-related lockdowns and fallout from the Ukrainian conflict hit many Middle Eastern economies. Azour stressed that “the recovery is moderate, with many caveats.”
Georgieva also highlighted the “terrible” situation in Sudan and Yemen, saying the highly visible wars in Ukraine and Gaza had “overshadowed the pain and suffering that is happening in other places”. You said that all these countries are benefiting from “the support and attention of the IMF, however difficult the conditions may be”.