MARRAKESH, MOROCCO – OCTOBER 13: Ajay Banga, President of the World Bank Group, speaks during the International Monetary Fund (IMF) meeting in Marrakesh, Morocco on October 13, 2023. (Photo by Abu Adem Muhammed/Anadolu via Getty Images)
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The president of the World Bank on Tuesday said that it will be some time before progress toward a more peaceful Middle East can resume in earnest.
Ajay Banga told CNBC that the onset of the Israel-Hamas war has thrown nascent normalization talks off course, making regional cooperation much more difficult.
“We were working towards a more peaceful Middle East and many countries in this region have begun to speak to each other about the opportunity of moving forward with a new platform of being together,” Banga told CNBC’s Dan Murphy.
“I think it’s clearly going to be a little while until this sort of works out one way or the other,” he added.
Banga was speaking at the Future Investment Initiative Institute conference in Riyadh, where business leaders are gathered to discuss economic and investment prospects of the Middle East region.
This year, the event has been overshadowed by Israel’s ongoing offensive against the Gaza Strip, following the Oct. 7 terror attacks carried out by Palestinian militant group Hamas against Israel. The hostilities came as Israel had been making moves to normalize diplomatic ties with its neighbors, including Saudi Arabia.
The World Bank chief said that the conflict could have ramifications not only for the region, but also for the wider global economy — most notably for energy markets.
Oil prices have climbed in the more than two weeks since the onset of the violence amid concerns over supply constraints within the energy-rich region.
Banga also spoke of the potential impact on food and fertilizer prices, which similarly spiked in the wake of the Russia-Ukraine war.
“Other such things we saw when Russia came into Ukraine — that food and fertilizer and oil spiked,” he said.
“The world took a little while to come back from that, I’m worried that that will be another piece of danger,” Banga added.
It comes as the world economy confronts a new era of higher interest rates and slower growth, “something we’ve not been used to,” he said.
Banga’s comments were echoed on Wednesday by the head of the International Monetary Fund, who dubbed the Israel-Hamas conflict as another cloud on the horizon of an already gloomy economic outlook.
“What we see is more jitters in what has already been an anxious world,” Managing Director Kristalina Georgieva told a panel at the FII conference.
“And on a horizon that had plenty of clouds, one more — and it can get deeper.”