Global crisis around the corner

Mohamed Filali, founder and chief executive of Jurisfiscal, took to the microphones of Onda Madrid's "De cara al mundo" programme to analyse the impact of the Hamas-Israel conflict on the global economic outlook. 

Mr Filali, is there any data at the moment that can tell us how the situation between Israel and Hamas is affecting the international economy? 

The latest economic forecasts or outlooks have not taken into account the events of the last few days. Therefore, there are no very clear studies and analyses. Even so, there are some scenarios that can already be taken into account.  

At Jurisfiscal we admit two scenarios. The first is the one that represents almost 70% of the probability: containment and, therefore, no expansion of the conflict outside the Gaza Strip and Israel. In this context, the effect on the international economy would be very limited for many factors. One, because essentially energy will no longer be affected because Israel is not an oil producer, although it does produce gas. And two, because Gaza also has no economic activities that affect the fundamental factors that have a major impact on the international economy. 

There is another scenario, which is that the conflict expands to the north of Israel and the border with Lebanon, or expands further into Iran and Syria. In this case, indeed, the effect on the world economy could be very significant. It is said that, if it spreads to the north, it could affect international production to some extent and have an effect on the "political premium", which has an effect on political risk and on all maritime navigation, which could destabilise around 13% of the world's GDP (Gross Domestic Product). 

What are the first consequences for the population?  

This has an effect on inflation and if you also put it in the context of a global economy that is going through a difficult time, it could have a negative effect, although proportionally it will not be the same in Asia as in Europe or the United States.

Could we Europeans resist? You are here in Europe: COVID, the Russian invasion of Ukraine, now the Middle East, could the European economies, in particular the Spanish economy with its skyrocketing deficit and debt, resist? 

There are many factors, as I have mentioned, although the Spanish economy is expected to grow at a much higher rate, according to the latest data from the IMF (International Monetary Fund) and the World Bank, than other European countries.  

But all this growth is very fragile. A rise in oil, for example, has a negative effect on the functioning of the economy in Europe, especially if we know that economic growth is very low and a rise of 5 to 10% in the price of oil has an effect on the cost and various elements in all industries and economic activity, and therefore will raise inflation, and if you add to this the political fragility in the European democracies that you see in the political sphere it can have a negative effect and will affect the cost of living.  

But I don't think that if the conflict doesn't expand and stays within the zone where it is now it will have a direct effect on the international economy, a very important effect. But indeed an escalation of the conflict, when it expands a little bit, even if only to the north of Israel, is going to have a very negative effect on economic growth and, therefore, on other factors that generate more deficits and more inflation.