by Maha El Dahan, Yousef Saba and Nadine Awadalla

RIYADH (Reuters) – The war between Israel and Hamas constitutes an additional difficulty for the global economy which already faces many headwinds, the head of the International Monetary Fund (IMF) said on Wednesday, warning of a possible deterioration in the outlook economic.

“What we are seeing is more nervousness in an already anxious world,” Kristalina Georgieva said at the Future Investment Initiative (FII) conference in Riyadh.

“And on an already cloud-laden horizon, there is one more – and the situation can get worse.”

The FII conference, nicknamed “the Davos of the desert”, attracted senior figures from the financial industry, many of whom struck a pessimistic tone towards the global economy.

The event, traditionally focused on making deals, was overshadowed by the conflict between Israel and Hamas.

On Tuesday, JPMorgan boss Jamie Dimon encouraged Saudi Arabia not to abandon a US-led initiative to establish formal relations with Israel.

Kristalina Georgieva deplored “the tragic loss of human lives” and spoke of the long-term consequences of the conflict, such as the impact on the tourism sector of neighboring countries.

“Egypt, Lebanon, Jordan. The repercussions are already visible there,” she said. “Uncertainty is hurting tourist inflows. Investors will be hesitant to travel to these countries.”

Also commenting on the sharp rise in interest rates, the Managing Director of the IMF estimated that the world had been living in a “fantastic path” for almost 20 years.

“We’re not thrilled about going from zero to five so quickly, but here we are,” she said, referring to the US Federal Reserve’s main policy rate.

“So now (…) our call to all is: fasten your seat belts. Understand that interest rates will remain high for a long time.”

(Reporting Maha El Dahan, Yousef Saba and Nadine Awadalla; written by Bernadette Baum and John Stonestreet, Blandine Hénault for the , edited by Kate Entringer)

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