June 14, 2024

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The war between Israel and Hamas represents a new cloud on the global economic horizon

  • The head of the International Monetary Fund on Wednesday described the worsening conflict between Israel and Hamas as another cloud on the already bleak economic outlook.
  • “What we are seeing is more tension in a world that was already anxious,” International Monetary Fund Managing Director Kristalina Georgieva told a panel hosted by CNBC’s Dan Murphy.
  • Georgieva’s assessment that the conflict increases “more anxiety in the world” was echoed by other business leaders at the Future Investment Initiative Institute conference.

Kristalina Georgieva, Executive Director of the International Monetary Fund, at a press conference at IMF headquarters on April 14, 2023.

Kevin Deitch | Getty Images News | Getty Images

The head of the International Monetary Fund on Wednesday described the worsening conflict between Israel and Hamas as another cloud on the already bleak economic outlook.

“What we’re seeing is more tension in a world that was already anxious,” Kristalina Georgieva, managing director, told a panel hosted by CNBC’s Dan Murphy at the Future Investment Initiative Institute conference in Riyadh.

“And on a horizon that has a lot of clouds, there’s another one — and it could get deeper.”

Georgieva said that the economic repercussions of the war, which has now entered its third week, will be “terrible” for the parties involved, and will also have major repercussions for the region. These include negative impacts on trade and tourism.

“It’s terrible in terms of the economic prospects for the war center,” she said. “[There will be] Negative impact on neighbors: on commercial channels, on tourism channels, and on the cost of insurance.”

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Georgieva noted that countries including Egypt, Lebanon and Jordan are already feeling the repercussions.

“Uncertainty is killing tourist flows,” she said. “Investors will feel shy about going there.”

She did not mention the economic impacts of the conflict on the broader global economy, but noted that expectations were already stagnant.

Georgieva’s assessment that the war adds to the feeling of “a more tense world, more anxiety in the world” was echoed by other prominent business figures at the FII conference.

Dubbed “Davos in the Desert,” the event typically focuses on economic and investment prospects across the Middle East. This year was overshadowed by the ongoing Israeli attack on the Gaza Strip, following the terrorist attacks carried out by the Palestinian Hamas movement on October 7 against Israel.

The hostilities came as Israel was taking steps to normalize diplomatic relations with its neighbors, including Saudi Arabia.

Georgieva said the IMF’s first priority was the “tragic loss of life” caused by the attack and called for a solution as soon as possible.

She added: “The earlier a solution is reached, the better.”