Conflicts in Middle East could reshape global economy, says World Bank chief Ajay Banga

WASHINGTON: Rising geopolitical tensions are beginning to reshape economic expectations, with the World Bank’s president Ajay Banga warning that prolonged conflict could dampen growth, fuel inflation and strain vulnerable economies.

Speaking at the Atlantic Council, World Bank President Ajay Banga said the ongoing conflict in the Middle East, combined with existing crises such as the war in Ukraine, is already exerting pressure on global economic conditions.

“The emerging markets are more stressed… because they already start from a more complicated fiscal and debt situation,” he said, adding that advanced economies will also feel the effects.

Banga said global growth, previously projected at around 2.8 to 3 per cent, could decline by up to one percentage point in a more severe scenario. Inflation, he added, is likely to rise, with increases of up to two percentage points depending on the scale and duration of disruptions.

“If you looked at the world having a probable GDP growth of 2.8 to 3 per cent… you’re probably impacting that… all the way to a one plus percent in the more challenging… scenario,” he said.