Kristina Georgieva, managing director of the International Monetary Fund (IMF), spoke at the World Governments Summit in Dubai on 11 February about the resilience of the global economy despite various challenges, including short-term oil production cuts, the Israel-Gaza conflict, and tight monetary policies in the Middle East. She stated that surprisingly, the global economy has been resilient and growth exceeded expectations in 2023.
Georgieva noted that the Israel-Gaza conflict and subsequent rise in freight costs have impacted neighboring economies. Additionally, a nearly 50% drop in Red Sea transit volumes has affected these countries as well. Any further widening of the conflict could worsen the economic situation for countries still recovering from previous shocks.
Georgieva also mentioned that while growth is expected to surpass previous year’s growth in 2024, it remains anemic overall. The IMF expects 2024 GDP growth for the Middle East and North Africa (MENA) region to reach 2.9%, down from 3.4% previously.
The decline in oil demand will become increasingly challenging over time for net energy importers who are already limited by historically high debt and borrowing needs and limited access to external financing. Georgieva suggested eliminating regressive energy subsidies would discourage pollution and help improve social spending as part of gradual energy subsidy reforms recommended by the IMF on February 12th paper that could save $336bn in region equivalent to economies of Iraq and Libya combined.