World Bank President Ajay Banga said on Tuesday that the war in the Middle East is expected to weigh on global growth and push inflation higher, regardless of how quickly the conflict ends.
Speaking at an event hosted by the Atlantic Council ahead of next week's Spring Meetings of the World Bank and the International Monetary Fund, Banga said the scale of the economic impact would depend on the severity and duration of disruption to energy markets.
He said a rapid end to the conflict could allow some normalization in the coming months, while a more prolonged crisis could extend the fallout for six to eight months.
Banga said global growth, which had been projected at 2.83% before the latest conflict, could be reduced by 0.3 to 0.4 percentage points under a baseline scenario, with the hit rising to more than 1 percentage point if the war drags on. He added that inflation could increase by as much as 0.9 percentage points.
He also said finance officials gathering in Washington are expected to discuss how the World Bank and IMF can support countries hit the hardest by rising energy prices and supply chain disruptions stemming from the war.
Banga noted that the World Bank can rapidly disburse funding through its crisis response windows, similar to mechanisms used during the COVID-19 pandemic. Under the rules, countries can request quick access to 10% of undisbursed funds from previously approved programs.
He said countries affected by the war could potentially access around $30 billion through these crisis windows over the next two to three months, with as much as $70 billion available over six months.
Banga, however, warned governments against deepening fiscal strains through unaffordable subsidies that could create larger economic problems in the years ahead.
