The IMF’s No. 2 official said that the war between Israel and Hamas could spur inflation and hamper global growth, if it turns into a wider conflict that causes a significant increase in oil prices.
Modeling by the organization, whose mandate includes global economic surveillance, showed that a 10 percent increase in oil prices would lead to inflation being 0.4 percentage points higher a year later, IMF deputy managing director Gita Gopinath said in an interview on Bloomberg TV.
Under that scenario, global output would fall by 0.15 percentage points, which would add to an already difficult environment for inflation and growth that is challenging central banks.
Photo: Bloomberg
It is a bit early to know the full implications of the conflict, and much would depend on whether it draws in other countries, Gopinath said.
“If it turns into a wider conflict, and that causes oil prices to go up, that does have an effect on the economies,” she said. “That’s usually one of the channels through which we see that affecting global numbers.”
While nations in the Middle East are likely to be most directly affected, the impact from higher energy prices can become very widespread, Gopinath said.
More than 2,000 people have reportedly been killed since the start of the worst attack on Israel in decades. Israeli forces have since been battling to retake captured territory and signs are mounting that it is preparing for a ground invasion of Gaza.
Gopinath also spoke about China, debt restructuring issues and trade restrictions.
“[Beijing] cut interest rates, I expect that they’ll need to do more. Much more action needs to be done in terms of addressing the property sector problem,” she said.
She spoke of progress in making the debt restructuring process more efficient.
“We’ve seen low income countries that need to go through debt restructuring and it’s important to go through that in a timely manner. One goal of this week is to have a more efficient restructuring process,” Gopinath said.
Meanwhile, countries are placing more trading restrictions on each other. There were 3,000 new trade restrictions just last year.
“We really should make sure that this does not end up with all of us just turning inwards completely and a huge return to protectionism,” Gopinath said.
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his