Prolonged Israel-Hamas war means higher interest rates for longer: IMF

Inflation is still high and that requires interest rates to remain high, throwing more cold water on growth, said IMF

The International Monetary Fund (IMF) warned that a prolonged war between Hamas and Israel risks impacting economic activity and the inflation outlook in neighbouring countries such as Egypt, Lebanon and Jordan. 

“What is happening in West Asia is happening at a time when growth is slow, interest rates are high, the cost of servicing debt that has gone up because of Covid and the war,” Kristalina Georgieva, the fund’s managing director said on the second day of the Future Investment Initiative in Riyadh on Wednesday. 

“What we see is more jitters in what has already been an anxious world,” she said, “on a horizon that had plenty of clouds, one more and it can get deeper.” 

“Inflation is still high and that requires interest rates to remain high, throwing more cold water on growth”.

The Washington-based fund is concerned about the “tragic loss of lives but also destruction and reduction of economic activity,” in nearby countries. “Uncertainty is acute for tourist inflows,” she said, “investors are going to be shy to go to that place”.