IMF, World Bank reiterate Israeli war on Gaza to imperil global economy

The IMF and World Bank have warned that the Gaza war and the related attacks on shipping though the Red Sea pose threats to the global economy.

Israel's war on Gaza raging since October has already hit the Middle East and North Africa region's economy, said the International Monetary Fund's managing director Kristalina Georgieva on Monday.

Its knock-on effects could impact the world the longer the fighting drags on, Georgieva told the World Governments Summit, an annual gathering of business and political leaders in Dubai.

"I fear most a longevity of the conflict because, if it goes on and on, the risk of spillover goes up," she said.

"Right now we see a risk of spillover in the Suez Canal," she said, as Yemen's Iran-backed Houthis have attacked Red Sea shipping leading to the crucial maritime passage.

The Houthis are targeting what they consider Israeli-linked shipping in solidarity with Palestinians in Gaza, pushing some cargo carriers to take longer and more expensive routes to avoid attacks.

The UN Conference on Trade and Development warned late last month that the volume of commercial traffic passing through the Suez Canal had fallen more than 40 percent in the previous two months.

Top challenges to the global economic outlook

Georgieva said that if there are other "consequences in terms of where the fighting goes, it could be more problematic for the world as a whole".

On a personal note, she added that "as a woman, as a mother, grandmother... I pray for peace".

Israel has pounded Gaza since an October 7 attack by Palestinian resistance group Hamas, killing at least 28,340 people and injuring 67,984 others, while nearly 1,200 Israelis are believed to have been killed in the Hamas attack.

Despite the war-related uncertainties, Georgieva said the IMF is "very confident that the world economy is now poised for this soft landing we have been dreaming of".

"I expect to see by mid-year interest rates going in the direction inflation has been going for the last year now," she said, when asked about interest rates being cut in leading economies.

Also speaking at the summit, World Bank President Ajay Banga said that "what's going on Gaza, but also the challenges of Ukraine... and the Red Sea" are among the top challenges to the global economic outlook.

"When you add these variables to what is already turning out to be probably the lowest growth of the last 55 years.... that's something we have to keep a close eye on," he said.