Kristina Georgieva, the 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 shocks and challenges. She noted that despite short-term oil production cuts, the Israel-Gaza conflict, and tight monetary policies in the Middle East, the global economy has been able to withstand these challenges and even exceeded expectations in 2023.
Georgieva also pointed out that while growth is expected to continue in 2024, it will not be as strong as previously anticipated. The decline in oil demand will become an increasingly challenging issue for net energy importers who are already struggling with historically high debt and borrowing needs, as well as limited access to external financing.
Georgieva highlighted that the Israel-Gaza conflict has had a significant impact on neighboring economies, leading to an increase in freight costs and a nearly 50% drop in Red Sea transit volumes. She warned that any further widening of the conflict could worsen the economic situation for countries still recovering from previous shocks.
The IMF is also publishing a paper on February 12 recommending gradual energy subsidy reforms for the Middle East, which could save $336bn in the region, equivalent to the economies of Iraq and Libya combined. Georgieva suggested that eliminating regressive energy subsidies would discourage pollution and help improve social spending. Overall, Georgieva’s message was one of cautious optimism about the global economy’s ability to weather future challenges while recognizing that there are still significant obstacles ahead.