World Bank Warns Middle East War to Weigh on Global Economic Growth
Speaking at an Atlantic Council event ahead of next week’s Spring Meetings of the World Bank and International Monetary Fund, Banga stressed that the economic fallout hinges on how severely energy markets are disrupted.
He explained that a swift resolution could allow some normalization in the months ahead, whereas a prolonged conflict could prolong economic impacts for six to eight months.
Banga detailed that global growth, which had been forecast at 2.83% before the conflict, could decline by 0.3 to 0.4 percentage points in a baseline scenario, with losses exceeding 1 percentage point if the war endures. He added that inflation could rise by up to 0.9 percentage points.
Finance officials convening in Washington are expected to explore ways the World Bank and IMF can assist nations most affected by surging energy costs and supply chain disruptions, Banga noted.
Highlighting the bank’s capacity to act swiftly, he said, “The World Bank can rapidly disburse funding through its crisis response windows, similar to mechanisms used during the COVID-19 pandemic.” Under these rules, countries can request immediate access to 10% of undisbursed funds from previously approved programs.
Banga projected that nations impacted by the war could tap roughly $30 billion through these crisis windows over the next two to three months, with up to $70 billion potentially available over six months.
He cautioned, however, against excessive fiscal interventions, saying, “Governments [should] avoid deepening fiscal strains through unaffordable subsidies that could create larger economic problems in the years ahead.”
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