Mideast growth to slow in 2024 on oil cuts, Gaza conflict: IMF
The conflict has devastated the economies of both the embattled Gaza Strip and the occupied West Bank, IMF chief Georgieva said, adding that only ‘durable peace’ would improve the outlook
MIDDLE East economies are lagging below growth projections due to oil production cuts and the Israel-Gaza conflict, even as the global economic outlook remained resilient, the International Monetary Fund (IMF) said yesterday.
Despite uncertainties, “the global economy has been surprisingly resilient,” IMF Managing Director Kristalina Georgieva told the Arab Fiscal Forum in Dubai, while warning of a potential wider impact on regional economies of continued conflict in Gaza.
In a regional economic report last month, the IMF revised its gross domestic product (GDP) growth forecast for the Middle East and North Africa down to 2.9% this year, lagging below October projections, due in part to short term oil production cuts and the conflict in Gaza.
Israel launched indiscriminate airstrikes and a ground offensive that have killed nearly 28,000 people in Gaza, mostly women and children, according to local health officials.
The strikes came after Palestinian resistance group Hamas’s Oct. 7 attack, which resulted in the deaths of about 1,160 people in Israel, according to Israeli figures.
DEVASTATING ECONOMY
The conflict has devastated the economies of both the embattled Gaza Strip and the occupied West Bank, Georgieva said, adding that only “durable peace” would improve the outlook.
“The Palestinian economy’s dire outlook is worsening as the conflict persists,” she noted. “Only a durable peace and political solution will fundamentally change it”.
“Economically, the impact of the conflict has been devastating,” Georgieva said.
In the war-ravaged coastal territory, economic activity dropped 80% from October through December compared with a year earlier, the IMF chief said.
In the West Bank, the drop was 22%, she added.
The larger Palestinian territory has been hit hard by Israel’s withdrawal of 130,000 work permits, the proliferation of checkpoints that has heavily disrupted transportation, the loss of tourism, being cut off from Gaza and Israel’s withholding of tax revenues from the Palestinian Authority.
Georgieva spoke at the opening of the World Government Summit, an annual gathering of top business and political figures in the United Arab Emirates, which runs until Wednesday.
The IMF last month edged its forecast for global economic growth higher, upgrading the outlook for both the United States and China and citing faster-than-expected easing of inflation.
Georgieva said economies neighboring Israel and the Palestinian territories saw the conflict weighing on tourism revenues, while Red Sea attacks weighed on freight costs globally.
Those factors compounded “the challenges of economies that are still recovering from previous shocks,” she said.
The Iran-aligned Houthis in Yemen have been targeting commercial vessels with drones and missiles in the Red Sea since mid-November, and say their attacks are in solidarity with Palestinians in Gaza. But the U.S. and its allies characterize them as indiscriminate and a menace to global trade.
Several global shippers have been diverting traffic to the Cape of Good Hope, a longer route than through Egypt’s Suez Canal.
Egypt’s Finance Minister Mohamed Maait told Reuters on the sidelines of the summit that part of the impact of the diversion on Suez Canal revenues could be absorbed due to good growth in “the period before the events.”
AI TSUNAMI
The IMF will publish on Monday a paper that shows phasing out energy subsidies could save $336 billion in the Middle East, equivalent to the economies of Iraq and Libya combined, Georgieva said.
Georgieva said that eliminating regressive energy subsidies also “discourages pollution, and helps improve social spending.”
In the Middle East and North Africa (MENA) region, fossil fuel subsidies made up 19% of GDP in 2022, the IMF has said.
It has recommended the gradual unwinding of energy subsidies for the region’s economies, including oil exporters, and suggested targeted support as an alternative.
Advanced technology, including artificial intelligence, is a key theme of focus at the World Governments Summit, with several top executives from major global tech firms due to speak, including Sam Altman, CEO of OpenAI.
Georgieva said globally, 40% of jobs are exposed to AI, and countries that lack the infrastructure and a skilled workforce to invest could fall behind.
Regional economies such as the United Arab Emirates (UAE) and Saudi Arabia have significantly increased investment in AI as part of strategies to diversify income sources.