In an address to the World Governments Summit in Dubai on 11 February, International Monetary Fund (IMF) managing director Kristina Georgieva discussed the resilience of the global economy despite the impact of several factors, including short-term oil production cuts, the Israel-Gaza conflict, and tight monetary policies in the Middle East.
Georgieva noted that while the global economy has been resilient and growth exceeded expectations in 2023, there are still challenges to be addressed. The Israel-Gaza conflict has caused an increase in freight costs and a nearly 50% drop in Red Sea transit volumes, which has affected neighboring economies. Any further widening of the conflict could worsen the economic situation for countries still recovering from previous shocks.
The decline in oil demand is also a significant challenge for net energy importers, who are already limited by historically high debt and borrowing needs and have limited access to external financing. Georgieva emphasized that eliminating regressive energy subsidies would discourage pollution and help improve social spending.
The IMF is publishing a paper on February 12 recommending gradual energy subsidy reforms for the Middle East, which could save $336 billion in the region, equivalent to the economies of Iraq and Libya combined. Georgieva pointed out that while growth in 2024 is expected to surpass the previous year’s growth, the global medium-term growth prospects remain anemic. The IMF expects 2024 GDP growth for the Middle East and North Africa (MENA) region to reach 2.9%, down from 3.4% previously.