Sunday, December 3, 2023

IMF warns of long-term consequences to Middle East economies from Gaza war

The Managing Director of the International Monetary Fund (IMF) has warned that the war between Israel and Hamas is already impacting Middle East economies, and could lead to long-term economic damage.

Speaking to CNN’s Richard Quest in front of an audience at the Future Investment Initiative (FII) in Saudi Arabia, Kristalina Georgieva said: “What we see is more jitters in what has already been an anxious world. And on a horizon that has had plenty of cloud, one more and it can get deeper.”

Georgieva told the conference the Fund is concerned firstly with “the tragic loss of life”, adding it is also worried about the “destruction and reduction of economic activity”, such as children not going to school and the impact on neighboring countries who are dependent on tourism.

Georgieva also warned investors to expect interest rates to stay elevated, telling Quest: “We have spent the last 20 years, living frankly in terms of interest rates, in fantasy land. How can you have interest rates at zero or even in negative territory, and still create the savings and the capacity to function? It is actually going to [be] normal to have interest rates that are in positive territory – the problem is, it has happened too fast and the jump is too high.”

When challenged that this is what the Fund wanted, Georgieva answered “We’re not thrilled with going from 0 to 5 [percent] so quickly – but we’re there. So now we’re there, our call to everybody is – buckle up. Make sure that you understand interest rates are here to stay for longer”.

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