Israel-Hamas war is an economic shock, says World Bank – 10/10/2023 – Market

World Bank President Ajay Banga said on Tuesday that the war between Israel and the terrorist group Hamas is an unnecessary global economic shock that will make it more difficult for central banks to achieve a soft landing in many economies if spread.

“It’s a humanitarian tragedy and an economic shock that we didn’t need,” Banga told Reuters during the annual meeting of the World Bank and IMF (International Monetary Fund).

Banga recalled that countries’ economies were beginning to recover after the difficulties faced since the start of the Covid-19 pandemic and followed by the war in Ukraine, before the conflict broke out in the Middle East.

“(Central banks were) starting to feel a little more confident that there was an opportunity for a soft landing, and that just makes things harder,” Banga said. He fears the effects of the confrontation if it extends to other countries or if it lasts for a long time. “It would be a crisis of unimaginable proportions,” he assessed.

At the same event, IMF chief economist Pierre-Olivier Gourinchas stated that it is too early to say how the scale of the conflict will affect the economy: “Depending on how the situation unfolds, there are many different scenarios that we haven’t even begun to yet explore, so we cannot yet make any assessment at this time,” he said.

Gourrichas released the Global Economic Perspective report this Tuesday, with the fund’s forecasts for the world’s economies, but fears about the conflict between Israel and Hamas were not included in the document, as it was completed on September 26, before the outbreak of conflict.

On Monday, the World Bank warned employees in an internal memo that it is seriously concerned about the “shocking escalation” of violence in the Israeli-Palestinian conflict.

The document cited a “devastating loss of life, destruction and large numbers of civilian casualties on both sides” but expressed support for the bank’s work in Gaza and the West Bank.

“The World Bank and our development partners have long worked to support the poorest and most vulnerable people in the West Bank and Gaza, and we remain committed to building the foundations for a more stable and sustainable future,” he said.

The Oct. 9-15 annual meeting in Marrakech is expected to focus heavily on increasing resources for the IMF and World Bank, but the attention of many participants on the first day turned to the possibility of a broader conflict.

“We are all very surprised by the magnitude of the casualties on both sides,” Anna Bjerde, managing director of operations at the World Bank, said in an interview with Reuters.

The conflict has already driven up oil prices and sparked a rush for security assets such as gold, which could harm developing economies.

World Bank chief economist Indermit Gill told Reuters the conflict could add to a larger catalog of risks already facing the global economy, including the fragmentation of trade, especially if it resurrects supply chain delays that have driven up prices. during the Covid-19 pandemic.

“Right now, the most pressing thing is inflation. If we start to see fuel prices go up and product prices go up because of these logistical congestions, it will only make the problems worse,” he said.

Gill said he fears the violence could overshadow important discussions planned at this week’s IMF and World Bank annual meetings about sovereign debt, lackluster growth prospects and the huge setback in development caused by the Covid-19 pandemic.

_{With information from Reuters and The New York Times}