Israel-Hamas conflict is hurting regional economies, IMF chief warns

People look at the debris of a building in Gaza (left) and Kristalina Georgieva, managing director of the International Monetary Fund (right).—Reuters/File
People look at the debris of a building in Gaza (left) and Kristalina Georgieva, managing director of the International Monetary Fund (right).—Reuters/File

International Monetary Fund (IMF) Managing Director Kristalina Georgieva said on Wednesday that the ongoing conflict between Israel and Hamas is not only causing human suffering but is also impacting regional economies.

Speaking at the Future Investment Initiative (FII) in Riyadh, Saudi Arabia, Georgieva highlighted the economic fallout that Israel’s neighbors are experiencing, particularly tourism-dependent countries like Egypt, Lebanon and Jordan.

The conflict began when Hamas, a Palestinian group, launched a surprise attack on Israel on October 7, resulting in casualties and hostages being taken.

Israel responded with a sustained campaign of airstrikes and a comprehensive land, sea and air blockade of Gaza. The Hamas-run health ministry in Gaza said the war has killed 6,546 Palestinians.

The economic implications of this conflict extend beyond the immediate battlefield. Wall Street experts have warned that the ongoing hostilities could have a negative impact on the global economy, especially if other countries become embroiled in the crisis. Georgieva expressed her concern about the economic challenges facing countries in the region.

Uncertainty and insecurity are harmful for countries dependent on tourism and investors may be cautious about the sector. This caution extends to the cost of insurance for goods transport, which may increase due to increased risks. Furthermore, the influx of refugees creates additional economic challenges in countries already accommodating displaced populations.

The Future Investment Initiative (FII), often referred to as “Davos in the Desert”, has historically been a platform for Saudi Arabia to showcase its domestic economic reforms and regional stability. Saudi Arabia had recently taken steps to improve relations with Iran and Syria, called for a permanent ceasefire in Yemen and was discussing recognizing Israel before the conflict began on October 7.

While Saudi officials have indicated that normalization of relations with Israel may be put on hold for the time being, regional stability remains the top priority. Saudi Finance Minister Mohammed al-Jadaan stressed the importance of preserving ongoing de-escalation efforts before hostilities escalate.

Bahrain’s finance minister, Sheikh Salman bin Khalifa Al Khalifa, who recognized Israel in 2020 as part of the US-brokered Abraham Accords, advocated regional integration. He stressed that the ethnic and religious divisions of the past should not become obstacles to future cooperation.

Jared Kushner, a former White House adviser and key figure in the Abraham Accords, suggested that the Hamas attack was aimed at disrupting the normalization of relations.

The Abraham Accords, which were intended to establish diplomatic relations between Israel and several Arab countries, have been seen as a potential threat by those opposed to such diplomatic progress.

Despite the regional turmoil, many in FIIs remain optimistic about Saudi Arabia’s resilience. As the world’s largest oil exporter, Saudi Arabia is well-positioned to absorb shocks and finance its Vision 2030 agenda.

The ambitious plan, led by Crown Prince Mohammed bin Salman, seeks to diversify the Saudi economy by boosting tourism, trade and mega-projects such as NEOM, a futuristic city worth $500 billion.

While the region continues to grapple with the effects of the Israel-Hamas conflict, Saudi Arabia aims to press ahead with its economic transformation, providing opportunities for companies and investors from around the world in the Middle East’s largest economy and manufacturing market. .

In conclusion, the Israel–Hamas conflict is not only a humanitarian crisis, but also has far-reaching economic consequences for neighboring countries and the wider region, affecting tourism, investment and political stability. The situation remains complex, and efforts to restore peace and stability are vital to the well-being of both the people and economies in the Middle East.

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