Israel-Hamas War Cuts MENA’s 2024 Growth to 2.6%

Israel-Hamas War Cuts MENA’s 2024 Growth to 2.6%

Key Points:

  •  Due to the Israel-Hamas conflict, economic growth in MENA and Pakistan has been downgraded from 3.3% to 2.6% for 2024.
  • Over 33,000 deaths in Gaza; severe Israeli countermeasures have weakened the Gazan economy by over 80%.

The International Monetary Fund (IMF) has issued grave warnings about the long-lasting economic impacts of regional instability, particularly due to the Israel-Hamas war. This conflict has escalated tensions and ushered in severe economic repercussions across the Middle East and North Africa (MENA). Originally, economic growth forecasts for the region, encompassing MENA and Pakistan, stood at a promising 3.3% for 2024. However, recent estimates have drastically reduced this figure to just 2.6%, underscoring the profound economic disruptions caused by the ongoing unrest.

Israel-Hamas: Over 33,000 Fatalities and Economic Collapse

The conflict, starting October 7, caused catastrophic human losses, with over 33,000 fatalities in Gaza alone. Israel’s severe retaliatory actions include a comprehensive Gaza offensive, a ban on Palestinian workers, and withholding of Palestinian Authority tax revenues. The Gazan economy has been decimated, suffering over 80% losses, while the West Bank also experienced significant economic hardships. Such measures have further complicated the already volatile economic landscape in the region.

Regional Economic Fallout: Suez Canal and Trade Disruptions

The conflict’s repercussions extend beyond immediate geographic boundaries, affecting various facets of regional economics. For instance, Iran’s unprecedented attack on Israel and Houthi rebels’ disruptions of maritime trade routes in the Red Sea have heightened tensions and economic uncertainties. This turmoil has notably impacted essential economic channels like the Suez Canal, where traffic has plummeted. Furthermore, container transport costs have quadrupled from $1,000 to $4,000, severely affecting trade-dependent economies.

Economic Divergence and Aid: A $63 Billion Lifeline

Significant financial assistance has responded to these challenges, mobilizing an $8 billion loan package for Egypt and a substantial $55 billion bailout from various donors. This support highlights the stark economic divergence within the region. While poorer nations face economic instability, richer Gulf exporters like Saudi Arabia and the UAE are diversifying to lessen vulnerabilities. However, the region faces a slowdown in oil economies due to voluntary oil cuts and decreased prices, complicating the economic landscape further.

Cautious Optimism Amidst Conflict

The regional economic outlook is cautiously optimistic despite concerns about ongoing conflicts and slow COVID-19 recovery. The IMF warns that stability erosion may threaten the medium-term economic outlook, significantly affecting trade and overall stability. The situation in Sudan and Yemen remains dire, with the IMF providing the necessary support to navigate these crises effectively.