IMF: Too early to assess ME war impact on growth

MANILA, Philippines — The International Monetary Fund (IMF) believes it is still too early to evaluate the impact of the ongoing war between Israel and Hamas on the global economy.

Krishna Srinivasan, director for Asia and Pacific Department at the IMF, said during the release of the Regional Outlook for Asia and Pacific that the multilateral lender is saddened by the loss of lives since the war in the Middle East erupted.

However, he said, “I think it’s a bit too early to assess the economic impact of the recent conflict… Going beyond this, I think it would be very hard for us to say what would impact right now.” He added that the impact of the war would vary depending on whether the country is an oil importer or an oil exporter.

“What we could say is there could be an impact on energy prices, oil prices, and again the impact would be country-specific. What we have done at the global level (is) to say that if there is a 10 percent increase in oil prices, what does it do to global output? What does it do to inflation?” he said.

According to Srinivasan, a 10 percent increase in oil prices would cut global output by 0.15 percent and push inflation higher by 0.15 percent the following year.

“So that’s a global number. But again, that’s where we have to see the impact across Asia will vary,” he added.

During the recently concluded IMF-World Bank meeting in Morocco, IMF Managing Director Kristalina Georgieva said the Israel-Hamas war has darkened the outlook for an already sluggish global economy.

“This is a new cloud on not the sunniest horizon for the world economy – new cloud, darkening this horizon,” Georgieva said in a press conference.

Georgieva noted that the IMF’s October 2023 World Economic Outlook, which was released last week, but drafted before the conflict broke out, already showed weak global growth.

The multilateral lender has kept its global gross domestic product (GDP) growth forecast at three percent for this year, but lowered it to 2.9 percent for 2024, as it warned that the world economy is “limping along, not sprinting.”

Economic managers in the Philippines are closely gauging the impact of the ongoing war on economic growth, oil prices and the movement of the peso.

Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. earlier said the conflict has not affected global oil prices, as well as the movement of the local currency versus the US dollar.

“So far, so good… I think so far, it hasn’t really affected oil prices… but it may have spillover effects on global growth,” Remolona said.

On the other hand, Socioeconomic Planning Secretary Arsenio Balisacan said the Israel-Hamas war is unlikely to have a significant impact on the Philippine economy.

“So far, there is hardly any impact, because there have been no major disruptions in the supply chain,” Balisacan earlier told reporters.