Conflict: If it widens, the Hamas-Israeli clash may leave ‘really big impact’ on trade, says WTO chief
Virendra Pandit
New Delhi: After the International Monetary Fund (IMF), the World Trade Organization (WTO) has also warned of a “really big impact” on already weak global trade flows if the Hamas-Israel conflict widens throughout the region.
“Everybody is on eggshells and hoping for the best,” Dr. Ngozi Okonjo-Iweala, WTO’s Director-General, said as she expressed the hope the war ends quickly, the media reported on Friday.
The WTO chief, who is in Morocco for this week’s annual meetings of the International Monetary Fund and World Bank, said the Middle East’s latest violence could add to ongoing factors throttling trade growth, including higher interest rates, a strained Chinese property market, and Russia’s 20-month-long war in Ukraine.
“We hope this war doesn’t spread and ends soon. Our biggest fear is if it widens because that will then have a really big impact on trade.”
Okonjo-Iweala said that despite a post-COVID recovery, the ongoing global uncertainty had already limited growth in trade. This could be exacerbated by the sudden outbreak of the October 7 war between Israel and the Islamist terror group Hamas that controls the restive Gaza Strip.
“There is uncertainty about whether this would spread to the entire Middle East, which could leave a big impact on global economic growth,” she said.
“We hope the conflict ends soon because it does create this uncertainty. It’s another dark cloud on the horizon.”
The Geneva-based WTO last week halved its growth forecast for global goods trade in 2023, citing persistent inflation, higher interest rates, the slowing Chinese economy, and the ongoing Russian war in Ukraine.
The WTO said merchandise trade volumes would increase by just 0.8 percent in 2023, compared with its April estimate of 1.7 percent.
For 2024, it said goods trade growth would be 3.3 percent, as compared to its April forecast of 3.2 percent.
The 164-member WTO repeated its warning that it saw some signs of trade fragmentation linked to global tensions, but no evidence of a broader de-globalization that could threaten its 2024 forecast.
The WTO chief’s warning came a day after the International Monetary Fund (IMF) First Deputy Managing Director Gita Gopinath said any escalation of the Israel-Hamas war could increase crude prices worldwide. A 10 percent increase in oil prices can result in inflation rise by 0.4 percentage points a year later.
If that happens, global output will fall by 0.15 percentage points, adding to an already difficult environment for inflation and growth that is challenging central banks the world over.
But, she said, it was a bit early to know the full implications of this ongoing conflict, and much will depend on whether it spreads to other countries.
