Israel's war on Gaza set to stall global economic recoveryhttps://en.majalla.com/node/303841/business-economy/israels-war-gaza-set-stall-global-economic-recovery
Israel's war on Gaza set to stall global economic recovery
The human loss and destruction are set to rise as a ground invasion expands. This will, in turn, widen the geopolitical divide between the allies of each side.
AFP
Demonstrators march during the “Palestine to Africa- Palestinian Liberation is Black Liberation” protest in New York on November 5, 2023.
Israel's war on Gaza set to stall global economic recovery
Israel’s war on Gaza is the most dangerous threat to the stability of the region and the wider world. Most observers agree that it is likely to be a long-term conflict.
Civilian casualties are already high and look likely to continue. And the repercussions – humanitarian, political, social and economic – are profound in the Middle East and of global significance. This war is a worldwide issue.
The human loss and destruction are set to rise as a ground invasion expands. This will, in turn, widen the geopolitical divide between the allies of each side. All of this comes at a difficult time for the global economy.
It will stall global economic recovery, which was already reeling from a range of serious problems – from the pandemic to the climate crisis and the impact of natural disasters – to soaring inflation and rising interest rates.
The words of a former French foreign minister, Philippe Douste-Blazy, summarise the outlook at a time when a regional conflict could become a clash of civilisations between the East and the West: “The world has never been worse than it is today. It's like we're shooting into the future."
Gone are the days of delineated military wars between Zionism and a secular form of Arabism, which came with rules of engagement.
Now, there is a far-right Israeli government which rejects any worldview other than its own, and uses internationally-banned white phosphorous weapons. It faces a militant group – Hamas – which is also ruthless.
A woman walks past a poster showing a fighter of the Izzedine al-Qassam Brigades, the military wing of the Palestinian Hamas movement, carrying a rocket launcher and posing near a mockup of a kamikaze drone.
The human loss and destruction are set to rise as a ground invasion expands. This will, in turn, widen the geopolitical divide between the allies of each side. All of this comes at a difficult time for the global economy.
This humanitarian tragedy in the Middle East will undoubtedly impact the global economy. The drama and horror of war raging on the ground can touch millions of lives indirectly, and the knock-on effects can be profound.
Global economic fallout
Major global institutions of the financial system have torn up their economic forecasts four times in a single year, not because of faulty forecasts and analysis but because of the run of shocks and surprises that have upended expectations.
Only last month, both organisations were holding their annual meetings in Marrakech. Even before finishing what should have been set-piece events, it was clear that the assumptions and expectations outlined were outdated and destined for downward revisions.
Even before the war in Gaza, the uncertainty rate caused by Russia's invasion of Ukraine was around 50%, according to The Economist. Now, with more conflict raging in the Middle East, it will have risen even further. It must be gradually approaching total uncertainty.
The IMF's forecasts pointed to global economic growth of 3% by the end of this year, falling to 2.9% by the end of 2024. Other predictions already expect next year's growth to be as low as 2.2%, according to French export insurance group Coface.
This grim outlook comes in the context of not just war but of more mundane factors. China's economy is faltering, with growth below 5%. The European Union is flatlining, with growth of just 0.1%. On its part, the United States is improving, with better-looking growth of around 5%.
But all those predictions were out before 7 October. Hamas's attacks and Israel's response changed the global economic calculus. Further downgrades are very likely in what could be the biggest hit to the worldwide economy since the pandemic.
Europe's weakness
Europe looks like the weakest link in the chain.
German exports, the region's economic powerhouse, have been hit by the war in Ukraine. There was a broader impact from the surge in energy prices after Vladimir Putin's invasion, which stoked global inflation.
The outlook for growth in the wider European Union is bleak. That implies problems for the private sector. Germany's Allianz Trade predicts that the risk of bankruptcy of European companies will increase by 6% in 2023 and 10% in 2024.
This could threaten the stability of the labour market and impact the situation of immigrants. Meanwhile, the practice of discriminating against workers based on their race is widespread; for example, the unemployment rate for Moroccans in France is 17%, compared to less than 8% for Europeans.
A protester holds a banner that reads "Did you have a good day, Dad? - Yes, you killed a child your age" in Bordeaux, southwest France on June 30, 2023
Inflation rates have fallen from their peak to half the levels seen at the start of the year. Central banks have lifted interest rates, helping curb consumer spending and cooling the rate at which prices are rising. While this has eased inflation, it has also limited economic growth and domestic consumption.
Inflation rates have fallen from their peak, to half the levels seen at the start of the year. Central banks have lifted interest rates, helping curb consumer spending and so cooling the rate at which prices are rising.
Vulnerability to shocks and a media war in Europe
It leaves the economic outlook vulnerable to shocks like the war in Gaza, not least via the impact of the high-profile conflict on consumer confidence.
The divisions that the war – and the coverage of it – generate are also highlighting the division of European society. Media monopoly in favour of the Israelis makes it difficult for anyone to express support or sympathy for the Palestinians, although that hasn't stopped protestors from taking to the streets.
At the same time, Israel appears to be weak, with divisive politics in the run-up to the war already hurting its economy. That has shown up in international ratings. Both Moody's and Fitch have placed Israel's credit rating at A+ with a negative outlook.
Meanwhile, Israel depends on $14.3bn in military and economic support in a year when the United States already spends $92bn supporting its allies in Ukraine, Taiwan, and the Middle East.
Demonstrators march during a rally in support of Palestinians in New York on November 7, 2023.
Israel depends on $14.3bn in military and economic support in a year when the United States already spends $92bn supporting its allies in Ukraine, Taiwan, and the Middle East.
International reaction to the war has included problematic media coverage, with some French outlets misrepresenting events and stoking prejudice against some Arab immigrant groups. Voices calling for restraint amid Israel's response to the 7 October attacks have been vilified, including the football player Karim Benzema.
Even respected global political and diplomatic figures – up to and including the United Nations Secretary-General Antonio Guterres, who linked the current crisis to an attempt to obscure the Palestinian issue – have been attacked, although the Arab League, Russia, China, and the countries of the global south share his view.
Provocative rhetoric in France
The most dangerous parallel has also been drawn in the French press, where Islam has been called "the Nazism of the 21st century". The quote has been attributed to the extremist lawyer Jordan Bardella, who is calling on the European Union to stop aid to Arab and Islamic countries and to close places of Muslim worship in France.
Similarly, the right-wing newspaper Marianne has attacked the presence of Islam in France and called for tests over the commitment of Arab and Muslim French citizens to the principles of the Republic.
Israeli Prime Minister Benjamin Netanyahu, right, welcomes French President Emmanuel Macron before their talks in Jerusalem, Tuesday, Oct. 24, 2023.
Some factions of the left-wing opposition France Unbowed party – led by Jean-Luc Mélenchon, who was born in Tangier, Morocco – are concerned about the rise of xenophobic sentiment in France under the guise of combating anti-Semitism.
They fear that the division in society between Muslims and Jews endangers national stability and relations with North Africa. The party refuses to label the Hamas movement as a terrorist group and considers it a liberation movement, which has stirred anger among the political elite and the French government.
The Moroccan solution
The Muslim world is aware of the problems, how they have occurred in rapid succession and the wider dangers they pose. A senior Moroccan official spoke to Al Majalla on the sidelines of an event at which the country outlined hopes for economic growth of 3.6%.
The country's Fouzi Lekjaa, minister delegate in charge of the budget, offered an overview of Rabat's view of current global geopolitics.
"The world faces a continuous succession of crises, the latest being the war in Gaza. Before that, it was the Ukraine war, violent climate changes threatening food security, natural disasters and inflation," he said.
A woman reacts standing in front of her earthquake-damaged house in the old city of Marrakesh on September 9, 2023.
The world faces a continuous succession of crises, the latest being the war in Gaza. Before that, it was the Ukraine war, violent climate changes threatening food security, natural disasters and inflation.
Fouzi Lekjaa, Morrocan minister delegate in charge of the budget
Morocco is already taking steps to alleviate the potential knock-on effects on its economy. Lekjaa explained that there were royal directives for direct support for poor Moroccan families – via monthly payments between $50 to $120 – brought in at the start of the year to help safeguard vulnerable people.
There is also support for middle-income families based on property values. These additional social expenditures will cost around 45 billion Moroccan dirhams in the next year's budget ($4.4bn).
The threat of global turbulence comes just as Morocco's economy gradually recovers from two years of severe drought and the effects of a devastating earthquake that cost $12bn to rebuild.
Displaced people reside in a makeshift camp on the road between Marrakech and Tarodant in the Atlas mountain range.
Morocco, which has diplomatic relations with Israel under the Abraham Accords along with the UAE, Bahrain and Sudan, has a clear position on the Gaza war, calling for an immediate ceasefire, the opening of avenues for the delivery of aid, food, and medicine to the Gaza Strip and a cessation of violence from both sides.
Morocco has a history of diplomacy and peace-making in the Middle East. It paved the way for the Oslo negotiations in 1993 and hosted the Economic Peace Summit in Casablanca in 1994.
Rabat has backed Spain's call to organise a global peace conference in Madrid – to look for a lasting solution to the conflict based on the two-state solution, where Israel and a fully-fledged Palestinian state live side-by-side in security and peace.
If the conference takes place, one of the items on its agenda is likely to be the deployment of international peacekeepers. The US may not oppose that option, but a less aggressive Israeli government will need to be in place for this to gain any traction.
