The International Monetary Fund (IMF) revealed in a recent study that wars lead to significant economic losses lasting over a decade, with GDP declining by an average of 7% over five years. The study emphasizes that the impacts of armed conflicts extend beyond human dimensions to deeply and sustainably affect economies.
This study comes at a time when armed conflicts are at their highest levels since the end of World War II, with the report indicating that over 35 countries are suffering from conflicts, and approximately 45% of the world's population lives in affected countries. These issues were addressed in two chapters of the 'World Economic Outlook' report, which will be released in full next Tuesday.
Details of the Findings
The IMF reported that countries experiencing armed conflicts face significant economic challenges, as wars incur high economic costs. It noted that neighboring countries may also suffer from negative economic impacts, even if they do not experience direct destruction.
Furthermore, it added that production losses resulting from conflicts persist even after a decade, often exceeding those associated with financial crises or natural disasters. IMF Managing Director Kristalina Georgieva confirmed that increasing geopolitical tensions directly affect global economic forecasts.
Background & Context
Historically, armed conflicts have led to the deterioration of national economies, as wars require increased military spending, negatively impacting investments in other sectors. Data shows that nearly half of the world's countries have increased their military budgets over the past five years, reflecting rising geopolitical tensions.
The IMF also pointed out that military spending has significantly doubled, especially by the world's largest arms manufacturers, raising concerns about the sustainability of these trends amid global economic crises.
Impact & Consequences
Conflicts exacerbate economic crises, contributing to currency devaluation and increased inflation. The report indicated that the fiscal deficit has worsened by approximately 2.6 percentage points of GDP, increasing economic pressures on affected countries.
Moreover, geopolitical tensions lead to higher shipping and insurance costs, driving up global commodity prices. The World Bank warned that the continuation of conflicts could worsen economic conditions in the region.
Regional Significance
Arab countries are particularly affected by armed conflicts, experiencing a sharp decline in growth rates. The World Bank has reduced its growth forecast for the Middle East and North Africa region for 2026 to just 1.8%, reflecting the negative impacts of conflicts on regional economies.
In this context, the recent conflict in the Middle East serves as an additional shock, leading to the closure of the Strait of Hormuz and destruction of energy infrastructure, which has increased financial volatility and weakened growth forecasts.
In conclusion, the persistence of armed conflicts worldwide underscores the urgent need to promote peace and stability, as achieving sustainable development requires a safe and stable environment. Affected countries must work on rebuilding their economies and strengthening macroeconomic foundations.