Conflict in Gaza and a "tsunami" of change in the labour market driven by AI pose the biggest threats to economic growth in the region, the International Monetary Fund warned on Sunday.
The IMF’s managing director Kristalina Georgieva addressed the Arab Fiscal Forum in Dubai to suggest a road map out of economic uncertainty in the region.
The forum was part of the curtain-raising pre-summit sessions held ahead of the three-day World Governments Summit, which officially begins on Monday at Madinat Jumeirah.
Ms Georgieva said the global economy had proved remarkably resilient in the face of continuing wars in Gaza and Ukraine, and disruption to trade routes.
Despite that, a decade of slow growth lies ahead as nations look to diversify economies and capitalise on new technological trends.
“While uncertainties are still high, fuelled by the tragic developments in the Gaza-Israel conflict, we are more confident about the global economic outlook,” she said.
“The global economy has been surprisingly resilient and with inflation going steadily down, we are heading for a soft landing in 2024.
“We project growth for this year to be 3.1 per cent, but we cannot declare victory prematurely.
“Medium growth prospects remain anaemic at around 3 per cent year after year in comparison with the historical average of 3.8 per cent in the decades before the pandemic.
“Prospects for boosting growth are still overshadowed by high interest rates and very importantly by the need to restore fiscal sustainability.
“Turning to the immediate prospects for the Middle East and North Africa, we expect GDP growth to reach 2.9 per cent this year.
“This is higher than last year, but below our October projections.”
Global impact as war rages
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The Israeli bombing of Khiam, a village near the southern Lebanese border with Israel. AFP -
Members of the Ghannam family check the damage to their home after an Israeli air strike hit the Rafah refugee camp in the southern Gaza Strip. EPA -
Mourners at Abu Yousef Al Najjar Hospital, in Rafah in the southern Gaza Strip. Reuters -
A rescuer puts out a fire after a car was hit by an Israeli strike in Rafah in the southern Gaza Strip. Reuters -
At Al Najjar Hospital in Rafah, Palestinians mourn after identifying the bodies of relatives killed in overnight Israeli bombardment on the southern Gaza Strip. AFP -
Palestinian families take refuge at a school affiliated with the UN Relief and Works Agency for Palestine Refugees in the Daraj neighbourhood. Getty Images -
Palestinian-Irish plastic surgeon Ahmed El Mokhallalati checks in on a Palestinian man wounded in an Israeli strike, at the European Hospital, in Khan Younis. Reuters -
A Palestinian man carries a bag of flour, as displaced Palestinians, who fled their houses due to Israeli strikes, take shelter near the border with Egypt in Rafah. Reuters -
Palestinian woman Amal Abu Hashesh, who escaped with her prosthetic leg after her house was hit by an Israeli strike, takes shelter in the European Hospital. Reuters -
Palestinians gather around a Hamas police vehicle after it was struck by an Israeli air strike in Rafah. AP -
Mother of hostage Amit Esther Buskila holds a poster of her daughter during a press conference in Paris with representatives of families of French hostages held by Hamas. Reuters -
People dance as Israeli protesters gather to block the entry of humanitarian aid trucks to the Gaza Strip at the Kerem Shalom border crossing. AFP -
Smoke billows during Israeli bombardment in Rafah. AFP -
Palestinians move along Salah Al Din road after an Israeli air strike on Al Maghazi refugee camp. EPA -
Displaced children sit on wooden pallets, as displaced Palestinians take shelter in a tent camp near the border with Egypt in Rafah. Reuters -
An Israeli tank moves along the border with Gaza in southern Israel. Getty Images -
Displaced Palestinians near the border with Egypt in Rafah in the southern Gaza Strip. Reuters -
A man carried an injured Palestinian man to Al Aqsa Hospital after an Israeli air strike in Deir Al-Balah in southern Gaza. Bloomberg -
A Palestinian woman reacts after an Israeli air strike in Deir Al-Balah. Bloomberg -
Palestinians search the site of a destroyed residential building hit by an Israeli air strike in Deir Al-Balah. Bloomberg -
A soldier visits the site of the Nova festival, with displayed photos of the people who were killed and kidnapped during the October 7 attack near the site. Reuters -
A displaced Palestinian girl, who fled her house due to Israeli strikes, arranges plants on a grave in a cemetery where she shelters, amid the ongoing conflict between Israel and Hamas, in Rafah in the southern Gaza Strip. Reuters
Economically, the impact of the conflict has been devastating in Gaza where activity dropped 80 per cent from October to December compared to a year earlier.
Meanwhile, in the occupied West Bank, activity dropped by 22 per cent.
The Palestinian economy's dire outlook is worsening as the conflict persists with only durable peace and political solution likely to change economic prospects.
The conflict is negatively affecting tourism, a lifeline for many across the region, with the fiscal impact seen in multiple areas, such as increased spending for social safety nets, defence and security.
Across the region and beyond, the wider impact of the conflict is being felt through rising freight costs and reduced Red Sea transit, which is down by more than 40 per cent – almost half of what they were a year ago.
The disruption compounds the challenges of economies still recovering from previous shocks such as global pandemics and natural disasters.
The longer the fighting goes, the higher the risks of conflict widening, aggravating the economic risks, Ms Georgieva said.
In January, the World Bank said the global economy was facing its slowest half-decade growth in 30 years, driven by Middle East conflict.
Between 2010 and 2020, the world averaged an average economic expansion of 3.1 per cent.
Despite the slow growth, the IMF said global economies should prepare for transformative change in labour markets by bolstering digital infrastructure.
“If we are to make full use of technological advancements, like the development in artificial intelligence, we must be ready for them,” said Ms Georgieva.
“We have done some analysis in the IMF that shows roughly 40 per cent of jobs over the next few years will be exposed to artificial intelligence. This is like a tsunami eating into labour markets.
“Some jobs will disappear altogether, some jobs will no longer exist, other jobs will be enhanced or diminished. And we know that we can only take advantage of opportunities if we are ready for them.
“What our analysis shows is that the level of preparedness for the arrival of artificial intelligence is very different across the world.
“Accessibility for everyone is very important in terms of labour market development and skills development for the new world of artificial intelligence," said Ms Georgieva.
