The World Trade Organization’s director-general warned that the ongoing Israel-Hamas conflict will impact global growth if it spills over to the wider Middle East region.
In an interview with CNBC aired on Monday, Ngozi Okonjo-Iweala said: “If it spreads beyond where it is now, to the rest of the Middle East, there will be an impact.”
“Remember that this region is also the source of a lot of the world’s energy with respect to natural gas as well as oil, which is still very much in use and all over the world. So you will see an impact on global growth, on global trade,” she added.
“We do hope it does not amount to that. We’re praying for de-escalation and peace,” she told CNBC’s Martin Soong on the sidelines of the Group of 7 meeting in Osaka, Japan.
Israel’s military campaign in the Gaza Strip was triggered by the brutal terrorist attack by Hamas militants in southern Israel on Oct. 7 that killed 1,400 people, including Americans. Nearly 240 people have been captured and taken as hostages to Gaza.
Economists have cautioned that any possible escalation of the Israel-Hamas war poses a major disruption to the global economy, and could drive up energy prices and disrupt key trade routes.
Trade growth is already “quite grim” due to the “fall in aggregate demand across the board,” said Okonjo-Iweala.
The WTO cut its trade growth forecast for 2023 amid a global manufacturing slowdown. In October, the organization scaled back on growth estimates in global merchandize trade for this year due to a continued slump that started in the fourth quarter of 2022.
Global merchandize trade volume is now projected to grow by 0.8% this year, less than half of the 1.7% increase forecasted in April. The 3.3% growth projected for 2024 remains nearly unchanged from the previous estimate.
“The rebound from China has not been as robust after the pandemic as we hoped. We have the real estate crisis in China. European Union growth is slower than we had also hoped,” said the WTO director-general.
“The U.S. seems to be doing okay but still, there’s the issue of aggregate demand falling across the board in most regions and both sectors and persistent inflation with interest rates going up higher for long,” she added.