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IMF Warns of Economic Impact: Israel-Hamas Conflict Expected to Affect Neighboring Economies

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"IMF Managing Director Kristalina Georgieva has warned that the Israel-Hamas war is poised to impact economies across the Middle East, including Egypt, Lebanon, and Jordan. Speaking at the 'Davos in the Desert' event in Saudi Arabia, Georgieva highlighted visible channels of impact, including potential hits to tourism, increased costs for insuring the movement of goods, and heightened investor caution about the region. There's also a risk of a rise in refugees in countries already accepting more. While the financial markets currently show relative stability, Georgieva emphasized the likelihood of growing economic fallout from the war. The UN Conference on Trade and Development (UNCTAD) echoed concerns about dire consequences for the 'Palestinian economy,' estimating potential damages in the tens of billions of dollars. Despite some growth, the Palestinian economy faces persistent challenges such as endemic poverty and declining foreign aid."

"Amidst the devastating economic repercussions of the Israel-Hamas conflict, the situation in Gaza paints a stark picture of hardship. Adjusted for inflation, Gaza's GDP has plummeted to levels nearly matching those of 1994. A recent statement from UNCTAD described life in Gaza in 2022 as a state of confinement in one of the world's most densely populated areas. The region grapples with chronic challenges, including insufficient access to electricity, clean water, and a proper sewage system.

These dire circumstances coincide with Saudi Arabia's annual investment conference, which, despite the escalating risks in the region, has attracted notable figures from Wall Street. However, discussions at the event revealed a somber outlook on the global economy. IMF Managing Director Kristalina Georgieva joined others in expressing concerns about the war unfolding during a period of slow growth, high interest rates, and increased public debt—consequences of substantial government spending to mitigate the impacts of the Covid-19 pandemic and the Ukraine war.

Georgieva's cautionary words resonated, emphasizing the persistence of higher interest rates and projecting inflation to remain above 2% through 2024, possibly extending into 2025. The collective call to readiness suggests a challenging economic landscape ahead, urging a proactive approach to navigate the prolonged impact of current global crises."

"In conclusion, the aftermath of the Israel-Hamas conflict casts a long shadow over Gaza's economy, with GDP levels, when adjusted for inflation, nearing those of 1994. Life in Gaza, already marked by severe constraints in access to electricity, clean water, and proper sewage systems, has further worsened. Despite these dire circumstances, global economic players gather at Saudi Arabia's annual investment conference, acknowledging the prevailing risks in the region.

The solemn discussions at the conference mirror the concerns voiced by experts like IMF Managing Director Kristalina Georgieva, who warns of a challenging global economic landscape. Against a backdrop of slow growth, high interest rates, and mounting public debt from pandemic and geopolitical responses, the call to 'buckle up' becomes a shared sentiment. Georgieva's projection of inflation remaining above 2% through 2024, possibly into 2025, underscores the prolonged impact of ongoing crises, emphasizing the need for proactive measures to navigate the turbulent economic road ahead."

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