Kristina Georgieva, the managing director of the International Monetary Fund (IMF), discussed the resilience of the global economy despite various factors such as short-term oil production cuts, the Israel-Gaza conflict, and tight monetary policies in the Middle East. She spoke at the World Governments Summit in Dubai on 11 February, where she stated that surprisingly, the global economy has been resilient and growth exceeded expectations in 2023.
The Israel-Gaza conflict and a subsequent rise in freight costs have impacted neighboring economies significantly. Georgieva also noted that any further widening of the conflict could worsen the economic situation for countries still recovering from previous shocks. The decline in oil demand will become an increasingly challenging issue for net energy importers over time due to historically high debt and borrowing needs, limited access to external financing, and decreasing transit volumes in Red Sea.
Georgieva pointed out that while growth in 2024 is expected to surpass the previous year’s growth rate, it remains anemic. The IMF expects GDP growth for MENA region to reach 2.9% in 2024, down from 3.4% previously.
The IMF is publishing a paper on February 12 recommending gradual energy subsidy reforms for MENA region countries. Georgieva emphasized that eliminating regressive energy subsidies would discourage pollution and help improve social spending by saving $336bn in total, equivalent to Iraq and Libya combined’s economies combined.
In conclusion, despite challenges such as political instability and declining oil prices, Georgieva believes that with responsible policymaking and sound economic management, developing countries can continue to grow at a healthy pace.