IMF warns: The Global Economic Growth Faces Threats from the Middle East Conflicts

The IMF economists express concerns that the conflict in Gaza could escalate further, and continued attacks by the Houthis in the Red Sea, a crucial route for 11% of world trade, could disrupt supply chains and impede the global recovery. The ongoing war in Ukraine adds to the risks, potentially causing spikes in food, energy, and transportation prices, which have already seen a sharp increase.

While the IMF raised the growth forecast for 2024 by 0.2% for the world and 0.1% for developed countries, the anticipated growth rates remain relatively low. The global economy is expected to expand by 3.1% in 2024 and 3.2% in 2025, below the multi-year average of 3.8%.

Specific country forecasts reveal a subdued outlook. The US economy is expected to grow by 2.1% this year and only 1.7% in 2025, down from 2.5% in the previous year. China's growth is projected to be 4.6% in 2024 and 4.1% in 2025, with a 5.2% estimate for 2023. The Eurozone is poised for recovery, but growth rates remain modest at 0.9% in 2024 and 1.7% in 2025, compared to a 0.5% estimate for the past year.

Despite a slight increase in optimism due to a faster-than-expected drop in inflation, the IMF underscores that global growth in the next two years is conditional. Geopolitical tensions, especially conflicts in the Middle East, pose significant risks to these "semi-optimistic" forecasts.

The report explicitly highlights Israel as a crucial factor in these risks, and the moderate economic environment could pose challenges for the country's recovery from recent conflicts. The IMF's forecast suggests that global economic stability remains fragile and subject to the resolution of conflicts in critical regions.