Global economy resilient despite uncertainties – IMF chief

MUMBAI (ICIS)–While short-term cuts in oil production, the Israel-Gaza conflict and tight monetary policies continue to impact economies in the Middle East, the global economy remains resilient, International Monetary Fund (IMF) managing director Kristina Georgieva said.

“The global economy has been surprisingly resilient. Growth exceeded expectations in 2023, and global headline inflation is expected to fall in 2024,” she said in her address to the World Governments Summit in Dubai on 11 February.

The Israel-Gaza conflict has led to rising freight costs and a nearly 50% drop in Red Sea transit volumes, she said, adding that the conflict was also impacting neighbouring economies.

Any further widening of the conflict could aggravate the economic harm to countries still recovering from previous shocks, Georgieva said.

Declining oil demand is expected to become an increasing headwind over the medium term, as “net energy importers are held back by historically high debt and borrowing needs, and limited access to external financing”, she added.

While growth in 2024 is expected to exceed the previous year’s growth, “global medium-term growth prospects remain anaemic at around 3%, compared to the historical average of about 3.8%,” Georgieva said.

The IMF expects 2024 GDP growth for the Middle East and North Africa (MENA) region to reach 2.9%, down from 3.4% previously.

The IMF is publishing a paper on 12 February recommending gradual energy subsidy reforms for the Middle East which could save $336bn in the region, equivalent to the economies of Iraq and Libya combined, Georgieva said.

Eliminating regressive energy subsidies would also “discourages pollution, and helps improve social spending,” she added.

Thumbnail image: IMF logo in Washington, US. (Xinhua/Shutterstock)