By David Lawder
WASHINGTON (Reuters) – The Worldwide Financial Fund stated on Thursday an escalation of the battle within the Center East may have vital financial ramifications for the area and the worldwide financial system, however commodity costs stay under the highs of the previous yr.
IMF spokesperson Julie Kozack informed a daily information briefing that the Washington-based world lender is carefully monitoring the state of affairs in southern Lebanon with “grave concern” and provided condolences for the lack of life.
“The potential for additional escalation of the battle heightens dangers and uncertainty and will have vital financial ramifications for the area and past,” Kozack stated.
She stated it was too early to foretell particular impacts on the worldwide financial system, however famous that economies within the area have already suffered vastly, particularly in Gaza, the place the civilian inhabitants “faces dire socioeconomic situations, a humanitarian disaster and inadequate support deliveries.
The IMF estimates that Gaza’s GDP declined 86% within the first half of 2024, Kozack stated, whereas the West Financial institution’s first-half GDP seemingly declined 25%, with prospects of an extra deterioration.
Israel’s GDP contracted by about 20% within the fourth quarter of 2023 after the battle started, and the nation has seen solely a partial restoration within the first half of 2024, she added.
The IMF will replace its financial projections for all international locations and the worldwide financial system later in October when the worldwide lender and World Financial institution maintain their fall conferences in Washington.
“In Lebanon, the current intensification of the battle is exacerbating the nation’s already fragile macroeconomic and social state of affairs,” Kozack stated, referring to Israel’s air strikes on the Iranian-backed Hezbollah militant group in Lebanon.
“The battle has inflicted a heavy human toll on the nation, and it has broken bodily infrastructure.”
The principle channels for the battle to influence the worldwide financial system have been via larger commodity costs, together with oil and grains, in addition to elevated transport prices, as vessels keep away from potential missile assaults by Yemen’s Houthi militants on vessels within the Pink Sea, Kozack stated. However commodity costs are at present decrease than their peaks up to now yr.
“I simply emphasize as soon as once more that we’re carefully monitoring the state of affairs, and it is a state of affairs of nice concern and really excessive uncertainty,” she added.
Lebanon in 2022 reached a staff-level settlement with the IMF on a possible mortgage program, however there was inadequate progress on required reforms, Kozack stated.
“We’re ready to interact with Lebanon on a potential financing program when the state of affairs is suitable to take action, however it could necessitate that the actions will be taken and decisive coverage measures will be taken,” Kozack added. “We’re at present supporting Lebanon via capability improvement help and different areas the place potential.”
