MARRAKESH (Reuters) – World Bank President Ajay Banga said on Tuesday that the conflict between Israel and Gaza was creating an economic shock that, if it spreads, would complicate central banks’ efforts.
“This is a humanitarian tragedy and an economic shock that we do not need,” Ajay Banga told Reuters on the sidelines of the annual meetings of the World Bank and the International Monetary Fund in Morocco.
Central banks were “starting to feel a little more confident about the possibility of a soft landing, and that’s just making things more complicated,” Ajay Banga said.
The direct economic impact is less significant than at the start of Russia’s invasion of Ukraine last year, as the conflict between Israel and Gaza does not impact exports of oil, grain and fertilizer. However, it is rippling through the financial markets, with a sudden rise in dollar assets.
Inflation has fallen in recent months, prices and wages have stabilized and markets have become accustomed to sustained high rates, Ajay Banga said, adding that another protracted conflict could disrupt this dynamic.
According to the president of the World Bank, the European Union initially “made a mistake” by announcing the freezing of development aid for the Palestinians, but this decision was later reversed, he recalled , adding that he would leave it to others to resolve the political aspects of the conflict.
At the end of the day, some places need help…and we will do our best to help them,” he said.
(Reporting David Lawder, Augustin Turpin, editing by Kate Entringer)
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