During the recent IMF and World Bank joint annual meetings in Marrakesh, Morocco, the monetary institutions were wary of the current state of the world economy, highlighting the impact of the ongoing pandemic, geopolitical tensions, trade disputes, and economic vulnerabilities.
The IMF said it expects global economic growth to slow to 2.9 per cent in 2024 from an expected 3 per cent this year. The forecast for next year is down a notch from the 3 per cent it predicted back in July. It added that a series of previous shocks, including the pandemic and Russia’s war in Ukraine, has slashed worldwide economic output by about $3.7 trillion over the past three years compared with pre-Covid trends.
While trying to strike an optimistic note, IMF chief economist Pierre-Olivier Gourinc assured that “the global economy is limping along, not sprinting”. However, the escalating conflict between Israel and Palestinian group Hamas is threatening to muddy the waters further for the world economy and consequences that are difficult to predict.
Despite attempts by US Treasury Secretary Janet Yellen to downplay the effects of war between Israel and Hamas on the global economy, other financial experts predict that the development of the conflict into a full-scale war would result in “a crisis of unimaginable proportion”.
President of the World Bank Ajay Banga warned that the conflict was “an economic shock we don’t need” as it adds to turbulence on financial markets already convulsed by worries about ‘higher for longer’ interest rates.
Oil and gas prices had already gone up over the past few days as traders fear potential risks that there could be disruption either of production or transport of oil in the region. According to the IMF, a 10 per cent increase in oil prices would reduce global economic growth by 0.15 per cent and increase global inflation by 0.4 per cent.
Of course, it is crucial to recognise that this conflict would have a devastating human toll. Innocent civilians on both sides would suffer unimaginable consequences, with the potential for mass displacement, civilian casualties, and the severe curtailment of basic human rights. Such a situation would undoubtedly reverberate throughout the already struggling global economy.
In an ever-interconnected world, economic stability is intrinsically linked with geopolitical stability. The immeasurable disruptions caused by this conflict, such as rising oil prices, damage to trade routes, and the devastation of infrastructure, would have far-reaching effects. Escalating tensions could deter foreign investments, disrupt supply chains, and harm emerging markets, ultimately affecting all nations, regardless of their proximity to the conflict.
Warmongers should know that their fingers would probably also be burnt as this vicious revenge circle gets wider. In the face of mounting tensions and the risk of all-out war between Israel and Gaza, the international community must act to prevent this nightmare from becoming a reality. World powers, which possess the necessary diplomatic influence and wisdom, must come together to exert pressure, encourage dialogue, and defuse the brewing conflict. By taking immediate action, the global community can avert a catastrophic situation that could critically impact regional stability, global security, and the already precarious world economy. The cost of inaction is far too great; the nations of the world must stand united in the face of this growing crisis.
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