Kristalina Georgieva, the Director of the International Monetary Fund (IMF), expressed concerns about the Middle East's complex economic landscape at the Future Investment Initiative today. She highlighted the negative impact of the Israel-Gaza conflict on regional economies like Egypt, Lebanon, and Jordan. The war is aggravating an already uncertain global economic situation marked by stubborn inflation and high borrowing costs.
She also pointed out the recurrent nature of these economic shocks, with evident repercussions on tourism-dependent economies such as Egypt, Lebanon, and Jordan. These shocks are characterized by stagnant growth, escalating interest rates, and surging debt servicing costs, a result of both pandemic effects and conflict.
Despite central banks' steep interest rate increases to combat inflation triggered by Russia's invasion of Ukraine, Georgieva warned of an extended period of high interest rates. She underlined the urgency of policy normalization following a long era of 'fantasy lane' interest rates. However, she reassured that these measures were aiding in decelerating inflation, although not at an optimal pace.
The IMF chief also acknowledged the forthcoming green transition's cost implications but emphasized its indispensability. She concluded by underscoring inflation's destructive effects on growth and investor confidence, and its disproportionate burden on economically disadvantaged groups.
Georgieva assured that the IMF is prepared to implement swift action and facilitate debt restructuring in response to these economic challenges. Despite this, she projected a slower global growth rate of 3% due to these ongoing issues.
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