IMF: Middle East Conflict Escalation Could Have Significant Economic Consequences

Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
TT
20

IMF: Middle East Conflict Escalation Could Have Significant Economic Consequences

Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki
Displaced families, mainly from Syria, gather at Beirut's central Martyrs' Square, where they spent the night fleeing the overnight Israeli strikes in Beirut, Lebanon September 28, 2024. REUTERS/Louisa Gouliamaki

The International Monetary Fund said on Thursday that an escalation of the conflict in the Middle East could have significant economic ramifications for the region and the global economy, but commodity prices remain below the highs of the past year.

IMF spokesperson Julie Kozack told a regular news briefing that the Fund is closely monitoring the situation in southern Lebanon with "grave concern" and offered condolences for the loss of life.

"The potential for further escalation of the conflict heightens risks and uncertainty and could have significant economic ramifications for the region and beyond," Kozack said.

According to Reuters, she said it was too early to predict specific impacts on the global economy, but noted that economies in the region have already suffered greatly, especially in Gaza, where the civilian population "faces dire socioeconomic conditions, a humanitarian crisis and insufficient aid deliveries.

The IMF estimates that Gaza's GDP declined 86% in the first half of 2024, Kozack said, while the West Bank's first-half GDP likely declined 25%, with prospects of a further deterioration.

Israel's GDP contracted by about 20% in the fourth quarter of 2023 after the conflict began, and the country has seen only a partial recovery in the first half of 2024, she added.
The IMF will update its economic projections for all countries and the global economy later in October when the global lender and World Bank hold their fall meetings in Washington.
"In Lebanon, the recent intensification of the conflict is exacerbating the country's already fragile macroeconomic and social situation," Kozack said, referring to Israel's airstrikes on Hezbollah in Lebanon.
"The conflict has inflicted a heavy human toll on the country, and it has damaged physical infrastructure."
The main channels for the conflict to impact the global economy have been through higher commodity prices, including oil and grains, as well as increased shipping costs, as vessels avoid potential missile attacks by Yemen's Houthis on vessels in the Red Sea, Kozack said. But commodity prices are currently lower than their peaks in the past year.
"I just emphasize once again that we're closely monitoring the situation, and this is a situation of great concern and very high uncertainty," she added.
Lebanon in 2022 reached a staff-level agreement with the IMF on a potential loan program, but there has been insufficient progress on required reforms, Kozack said.
"We are prepared to engage with Lebanon on a possible financing program when the situation is appropriate to do so, but it would necessitate that the actions can be taken and decisive policy measures can be taken," Kozack added. "We are currently supporting Lebanon through capacity development assistance and other areas where possible."
 

 

 

 



Türkiye Submits Draft Proposal to Iraq to Renew, Expand Energy Agreement

FILE PHOTO: A general view of oil tanks at Türkiye's Mediterranean port of Ceyhan, some 70 km (43.5 miles) from Adana February 19, 2014./File Photo
FILE PHOTO: A general view of oil tanks at Türkiye's Mediterranean port of Ceyhan, some 70 km (43.5 miles) from Adana February 19, 2014./File Photo
TT
20

Türkiye Submits Draft Proposal to Iraq to Renew, Expand Energy Agreement

FILE PHOTO: A general view of oil tanks at Türkiye's Mediterranean port of Ceyhan, some 70 km (43.5 miles) from Adana February 19, 2014./File Photo
FILE PHOTO: A general view of oil tanks at Türkiye's Mediterranean port of Ceyhan, some 70 km (43.5 miles) from Adana February 19, 2014./File Photo

Türkiye has submitted a draft proposal to Iraq to renew and expand an energy agreement between the two countries to include cooperation in oil, gas, petrochemicals and electricity, an Iraqi oil ministry official told the state news agency late on Monday.

The statement came after Ankara announced the end of a decades-old agreement covering the Kirkuk-Ceyhan oil pipeline.

"The Ministry of Oil is in the process of reviewing the draft agreement sent by the Turkish side and negotiating with them regarding it to reach a formula that serves the interests of Iraq and Türkiye", the Iraqi oil ministry official added.

The 1.6 million barrel-per-day Kirkuk-Ceyhan pipeline has been offline since 2023 after an arbitration court ruled Ankara should pay $1.5 billion in damages for unauthorized Iraqi exports between 2014 and 2018. Türkiye is appealing the ruling.

Türkiye still wants to revive the oil pipeline with Iraq, a senior Turkish official told Reuters earlier on Monday.

In a decision published in its Official Gazette on Monday, Türkiye said the existing deal dating back to the 1970s - the Türkiye -Iraq Crude Oil Pipeline Agreement - and all subsequent protocols or memorandums would be halted from July 27, 2026.

Iraq and Türkiye have been working to resume oil flows from the pipeline. Ankara said in late 2023 that the pipeline was ready to receive Iraq's oil but talks between Baghdad, Iraq's Kurdistan Regional Government and independent oil producers were not able to reach an agreement on terms.

The Turkish official said the pipeline had the potential to become a "highly active and strategic pipeline for the region".

The person added that Türkiye had invested heavily in its maintenance, and noted its importance for regional projects like the Development Road - a planned trade route involving Türkiye and Iraq.

"A new and vibrant phase for the Iraq- Türkiye pipeline will benefit both countries and the region as a whole," the Turkish official said, without giving details of what Ankara wanted the new agreement to include.

Türkiye sees the Development Road initiative - a high-speed road and rail link, running from Iraq's port city of Basrah on the Gulf to the Turkish border and later to Europe - as an opportunity to extend the pipeline further south. Baghdad allocated initial funding for the project in 2023.