Core issue: War will drag down global economic growth.

World Bank President Ajay Banga said last Friday (April 10) that even if the fragile ceasefire agreement announced by US President Trump is maintained, the Middle East conflict will still have a ripple effect on the global economy. He pointed out that if the ceasefire agreement fails to be implemented and the conflict escalates further, the damage will be even more severe.

He added that in the baseline scenario, if the war ends sooner, global economic growth could decline by 0.3 to 0.4 percentage points; if the war continues, this decline could widen to as much as 1 percentage point. Meanwhile, inflation could rise by 200 to 300 basis points; and in the event of a prolonged war, the impact on inflation would be even more significant, potentially reaching 0.9 percentage points.



The two-week ceasefire agreement announced by Trump appears precarious, with Israel and Iran continuing their attacks. Iran stated last Friday that frozen Iranian assets must be released and a ceasefire in Lebanon must be implemented before progress is made in the US-Iran talks scheduled for Saturday in Pakistan. Trump, meanwhile, claimed that US warships are reloading their ammunition to prevent the talks from failing.

Key concerns: Strait of Hormuz and energy infrastructure

Peng Anjie emphasized that the real question is whether the current peace situation and the upcoming negotiations over the weekend can bring about lasting peace and thus reopen the Strait of Hormuz. He stated, "If this goal is not achieved, and conflict breaks out again, will this have a greater or more lasting impact on energy infrastructure?"

He pointed out that the damage to energy infrastructure is currently under control, but if the conflict escalates, supply chain disruptions and the time required for infrastructure repair will further hinder the global economic recovery.

World Bank's response: Providing flexible financial support

The World Bank has begun consultations with some developing countries, including small island nations lacking natural energy resources, to discuss how to utilize the "crisis response window" under existing projects to obtain financial support.

The World Bank’s crisis response toolkit allows countries to access previously approved but not yet disbursed funds without additional board approval, thus significantly increasing the flexibility of crisis response.

However, Peng Anjie cautioned countries that relief measures should be targeted and temporary. He stated, "My concern is that we need to ensure they can weather this crisis, precisely do what they need to do, but avoid doing anything that further erodes their fiscal space." He specifically warned countries against establishing energy subsidies beyond their capacity, which could potentially lead to more serious problems in the future.

Long-term implications: Promoting energy supply diversification

Peng Anjie pointed out that this crisis has once again highlighted the need for countries to diversify their energy supplies and increase their self-sufficiency. Last June, the World Bank ended its long-standing ban on funding nuclear energy projects as part of its efforts to meet rising electricity demand.

He stated that the World Bank is preparing several energy projects and is currently in consultation with several countries. Some of these countries hope to extend the lifespan of their existing nuclear reactor units, while others are eager to develop nuclear energy.

Peng Anjie added, "If nuclear power, hydropower, geothermal power, wind power, and solar power cannot be developed at a large scale, they will eventually rely more on traditional fuels, which is something nobody really wants."

In conclusion, the global economy faces severe challenges.

The outbreak of war in the Middle East has posed a direct threat to global economic growth. Energy price volatility, supply chain disruptions, and inflationary pressures could combine to create a chain reaction of shocks. Although the World Bank is providing support through flexible crisis response tools and actively promoting energy diversification to enhance long-term resilience, President Angela Pennant's warning clearly indicates that only by achieving lasting peace and reopening key energy routes can the global economy effectively mitigate this shock.

Looking ahead, how countries balance short-term relief with long-term fiscal sustainability, as well as accelerating the transition to clean energy, will be a crucial issue in addressing this crisis.