IMF: Mideast war to slow world economic growth
The head of the International Monetary Fund warned Thursday that the damage to the global economy from the US-Israeli war against Iran will be considerable and long-lasting.
Despite the two-week ceasefire announced this week in the war launched over a month ago, Managing Director Kristalina Georgieva said at an event in Washington, “Even in the best case, there will be no neat and clean return to the status quo ante.”
As finance ministers and central bankers from around the world prepare to participate in the IMF and the World Bank’s spring meetings next week, Georgieva painted a pessimistic picture of the war’s economic impacts in her speech.
Citing a host of challenges, from the destruction of critical infrastructure in the wider Middle East to supply disruptions elsewhere, she said the world economy cannot help but fall short of the “much better place” it would have been in considering its strength in recent months on the back of strong artificial intelligence spending.
Fuel shortages
As an example, she referred to the serious fuel shortages hitting the Asia-Pacific due to the shutdown of the world’s largest liquefied natural gas (LNG) complex in Qatar. She said some 80 percent of the facility’s LNG had gone to the region before it was attacked by Iran in mid-March.
Noting the large scale of the impact, she said it is likely to take three to five years to restore the complex to full capacity.
Moreover, she said the ripple effects from the war will include not just diminished energy sources and essential industrial materials, but also the increased risk of pushing another 45 million people into hunger.
“So, the reality is we don’t truly know what the future holds,” Georgieva said. “What we do know is that growth will be slower, even if the new peace is durable.”
She said the IMF is set to lower its global economic projections to be released next week, without indicating by how much. In January, the organization projected growth of 3.3 percent for the world economy this year, up from the 3.1 percent it forecast in its previous key quarterly report, citing soaring AI investment and waning trade tensions.
Two principles
Asked what lessons countries should take from the war and other global challenges in a session following her speech, the IMF chief said two principles should guide them.
She described the first principle as realizing that “we are interconnected. So, the one thing that is not possible is to pull yourself out of any interdependence and say, ‘I’m going to do it all on my own.’ Even the largest economies cannot do that.”
The second, she said, is the need to be “objective in answering not only the question ‘what is in it for me,’ but also the question ‘what is in it for the other guy,’ and then recognize that there has to be an expanded value proposition for everybody.”
“If it is something in which one gains and the other one loses, I guarantee you it’s not going to last very long,” Georgieva said, without naming any individual or country.
