World Bank Chief Economist Warns of Famine Risk Due to War Against Iran

(Patria) - The war in the Middle East could push millions into famine as its economic consequences reverberate globally, warned the World Bank's chief economist Indermit Gill in an interview with AFP on Wednesday.

"You already have about 300 million people suffering from acute food insecurity," Gill said.

"That will increase by about twenty percent very, very quickly," as the domino effects increase.

Gill was speaking on the sidelines of the spring meetings of the International Monetary Fund and the World Bank in Washington.

The blockade of the Strait of Hormuz, a key oil supply route, has led to a sharp increase in fertilizer prices, as they rely on oil-based raw materials. Higher fertilizer prices, used in agriculture, could lead countries to stop food exports and hoard more food for themselves, further increasing food prices.

"These export bans worry us a lot," Gill told AFP.

The most vulnerable are people in countries at war or with fragile governments.
If the situation is not resolved soon, "famine will begin to massively haunt these countries".

Currently, the shortage of petrochemicals and their economic effects are most felt in Asia, Gill explained, but "as the crisis lasts longer, it will very quickly spread to Africa first."

"The food that is currently on the market has already been grown," Gill said, but the real effects could be felt in a few months.

Low-income people around the world tend to spend a larger portion of their earnings on basic necessities like food and fuel.

"If inflation occurs, especially in things that the poor consume relatively more often, that inflation will have huge consequences," Gill continued.
Gill also warned that inflation, not just food prices, could rise from about three percent globally to as much as 4.7 percent this year, in the most extreme scenario if the conflict extends to August.

Global growth could be reduced by as much as forty percent annually if the crisis drags on.

Higher inflation mixed with lower growth would be a "double whammy" for the debt sustainability of poor countries, further hindering their ability to cope with this and future crises.

Gill warned that many headline figures for regional growth might look too rosy, as the huge economies of the United States, China, and India, which are generally more insulated from external shocks, tend to inflate the estimates.

When you remove them from the estimates, "you start to see a lot more vulnerabilities," Gill said.

"Otherwise, that extreme scenario, with each passing day, is not so much an extreme scenario, as we get closer and closer to August."