Escalation of Middle East Conflict Poses Significant Economic Risks: IMF

The International Monetary Fund Thursday said the potential for further escalation of the conflict in Middle East heightens risks and uncertainty and could have significant economic ramifications for the region and beyond.    IMF spokesperson Julie Kozack told a news briefing that IMF is closely monitoring the recent intensification of the conflict in the region with great concern.   “With respect to the most recent developments, it is too early to speak to the economic fallout, but we know already that the economies at the center of the conflict, West Bank, Gaza, Lebanon, Israel, are hard hit,” Kozack said.  However, the spokesperson noted that with regards to the global economy, the main channels of impact have so far have been through shipping costs and commodity prices.  With respect to the latter, they remain below the highs of the past year, she added.  The spokesperson said that in Gaza, the civilian population faces dire socioeconomic conditions, a humanitarian crisis and insufficient aid delivery with preliminary official estimates indicating an 86 percent decline in GDP in the first half of 2024.    In the West bank, already grim prospects have further deteriorated, and preliminary official data indicate a 25 percent decline in GDP in the first half of 2024, she said.  In Lebanon, the recent intensification of the conflict is exacerbating the country’s already fragile macroeconomic and social situation.  The conflict has inflicted a heavy human toll on the country, and it has damaged physical infrastructure.  Israel’s GDP contracted by around 20 percent in the fourth quarter of 2023 after the conflict began, and the country has seen only a partial recovery in the first half of 2024, Kozack added.