The Lasting Impact of the Middle East War for Low- and Middle-Income Countries with Mohamed El-Erian and Judy Woodruff

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Health, education, climate.

**Rachel Glenister** (0:03)
United Nations of the World Bank, private actors.

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Locally-rooted institutions, locally-rooted experts.

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What we're really talking about is a very complex ecosystem.

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How do we find the interlinks?

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To innovate and come up with the best solutions, to actually rethink what we do as a broader development community.

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**Rachel Glenister** (0:47)
Hello and welcome to the Center for Global Development podcast. I'm Rachel Glenister, President of the Center for Global Development. And today we're going to have a little bit of a different format. We're going to bring you a conversation between Mohamed El-Erian, our incoming Board Chair at CGD, and Judy Woodruff from PBS. Now, Mohamed El-Erian is a very well-known commentator on financial market issues and emerging market economies. He was CEO of PIMCO, one of the largest investors in emerging markets, and also President of Queen's College, Cambridge. He is currently the Chief Economic Advisor at Allianz, which includes PIMCO. You will hear him a lot on CNN and other places discussing international finance issues. So we're extremely excited to welcome him as CGD Board Chair.
And to kick off his tenure, we asked Judy Woodruff, another member of our board, who is a longtime journalist on the News Hour at PBS, to interview him, something that she has done many times in the past on PBS. And they're going to talk about the Iran War, its impacts on low and middle income countries, on the global economy, why markets and economists differ in some ways on what they think the impacts are going to be and what reforms are needed, etc.
So I will pass over to the discussion that was held at CGD today when I'm recording this.

**Judy Woodruff** (2:32)
Thank you, Rachel. Delighted to be here this morning to have this conversation with our new board chair, Mohamed El-Erian. Mohamed, I want to ask you about something that's in the news right now, this what appears to be a deal, a memorandum of understanding between the United States and Iran, bringing to a close a war that's gone on longer, I think, than most people expected that it would.
What effect do you see it having on the world, the world economic picture, assuming it holds? But at this point, what does it look like to you?

**Mohamed El-Erian** (3:03)
So I think we should welcome something that has the potential, and I stress has the potential, to end a war that has hurt lives and livelihoods, not only in the region but around the world. It's far from a done deal. So if you look at the four major challenges, the first one, transforming a memorandum of understanding of 14 points into something that's comprehensive and implementable, that requires a lot of negotiations. The second is the parties involved go beyond the two parties that have signed this agreement. So there's a question, will other parties also abide by commitments that are made on their behalf in the agreement?
Third, there's this notion that restoring oil production, shipping of fertilizers of oils, like putting on a switch, you turn it on and off. That's not reality. It takes time.
And then the final issue is what I call the economic scarring. There are longer term effects, including some that haven't been felt yet. They're still in the pipeline, and we've got to manage that. So it's wonderful that we have a deal, but I think we should be focused on how to make this deal more meaningful to stop a war that has undermined lives and livelihoods. If you look at developing countries, if you look at the last six years, this is the third major shock. Lots of minor shocks, but the third major shock. The first one was COVID. The second one was what happened to wheat crisis and energy prices following Russia's invasion of Ukraine. And then there's a trade issue. And what typically happens when you have a shock is everybody focuses on what happens in advanced countries. The good news is we haven't had a systemic crisis in the developing world. The bad news is we've run down whatever element of resilience was left, and that has been used up for every one of this shock. I'm talking about financial resilience, I'm talking about human resilience.
So this shock is going to have long lasting effects at a time when most countries are already squeezed, especially investing in the social sectors, health, education, and most countries have to invest in new technologies so that they don't get left behind. So it's a very serious setback for development, and it's one unfortunately that if we're not careful, it's going to play out over the next month's quarters and years.