Israel-Hamas War Is Sending Economic ‘Jitters’ Through Region, Says IMF Head

The Israel-Hamas war is taking an economic toll on the region, according to the managing director of the International Monetary Fund, Kristalina Georgieva.

“You look at the neighboring countries – Egypt, Lebanon, Jordan – there the channels of impact are already visible,” Georgieva said on Wednesday, speaking at the Future Investment Initiative in the Saudi capital, Riyadh.

She said the IMF is concerned about the loss of life in the war but also about the reduction of economic activity as a result of the conflict.

“What is happening in the Middle East is happening at a time when growth is slow and interest rates are high, and the cost of servicing debts has gone up because of COVID and war,” she said.

“What we see is more jitters in what has already been an anxious world.”

Georgieva listed several issues affecting regional economies.

“Uncertainty is a killer for tourist inflows” for tourism-dependent countries, she said. “Investors are going to be shy to go to that place. [Furthermore], the costs of insurance. If you want to move goods, they go up. [In addition, the] risks of even more refugees in countries that are already accepting more.”

Georgieva spoke a day after US business leaders told the forum that the war could deal a heavy blow to the global economy, especially if it draws in other countries.

The annual forum, dubbed “Davos in the Desert,” has typically served as a chance for Saudi Arabia to showcase domestic economic reforms, the success of which, Saudi officials say, partly hinges on regional stability.

While several high-profile speakers addressed the regional turmoil, forum participants highlighted the capacity of Saudi Arabia, the world’s biggest oil exporter, to withstand financial shocks using its sovereign wealth fund, the Public Investment Fund.

Meanwhile, speaking to Israeli media on Wednesday, Israeli Finance Minister Bezalel Smotrich said the direct cost of the war for Israel was about 1 billion shekels ($246 million) a day. He did not provide an assessment of the indirect costs and was unfazed by S&P Global’s downgrade on Tuesday of Israel’s financial outlook from “stable” to “negative.”

Smotrich said the revision was “alarmist” and he did not anticipate major Israeli deficits despite the crisis.