Israel-Hamas war already affecting regional economies: IMF

Photo : Palestinians stand next to a car destroyed during a raid by Israeli troops at the Nur Shams refugee camp near the northern city of Tulkarm in the occupied West Bank on October 20, 2023.

The raging war between Israel and Hamas is already battering the economies of nearby countries, the managing director of the International Monetary Fund told a Saudi investor forum on Wednesday.

“You look at the neighbouring countries -– Egypt, Lebanon, Jordan –- there the channels of impact are already visible,” Kristalina Georgieva said at the Future Investment Initiative (FII) in the Saudi capital Riyadh.

The Palestinian militant group Hamas staged a shock attack on Israel on October 7, killing more than 1,400 people and taking 222 hostages, according to Israeli authorities.

Israel has responded with withering air strikes and a near-total land, sea and air blockade of Gaza, where the Hamas-run health ministry says 5,791 people have been killed in the war so far.

Georgieva spoke one day after Wall Street titans told the forum that the war could deal a heavy blow to the global economy, especially if it draws in other countries.

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

“You have tourism-dependent countries — uncertainty is a killer for tourist inflows,” she said, describing the potential economic cost for countries in the region before listing specific risks.

“Investors are going to be shy to go to that place. Cost of insurance — if you want to move goods, they go up. Risks of even more refugees in countries that are already accepting more.

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

While several high-profile speakers have addressed the current regional turmoil, FII attendees have highlighted the capacity for Saudi Arabia, the world’s biggest oil exporter, to withstand shocks and finance reforms using its deep-pocketed sovereign wealth fund, the Public Investment Fund.

The Vision 2030 agenda of the kingdom’s de facto ruler, Crown Prince Mohammed bin Salman, aims to transition the economy away from fossil fuels by turning Saudi Arabia into a tourism and business hub marked by so-called giga-projects, including a $500 billion futuristic megacity known as NEOM.

“In Saudi Arabia itself, everything will go ahead, and the companies in Western countries and India and China will not miss out on the Saudi market,” said Naser al-Tamimi, Middle East analyst at the Italian Institute for International Political Studies.

“You’re talking about the biggest economy in the Middle East, the biggest construction market in the Middle East.”