Amman, July 22 (Petra) - World Bank Chief Economist Indermit Gill said on Wednesday that escalating hostilities between the United States and Iran could fuel inflation, push up interest rates, and reduce global economic growth to 1.3% from the previously projected 2.9%.

In an interview with Reuters, Gill said the World Bank outlined three possible scenarios in its June economic forecasts because of the high level of uncertainty surrounding the conflict in the Middle East.

He said the worst-case scenario, under which the conflict continues for six months or longer, is becoming increasingly likely and would drive global inflation to 4.5%.

Gill said a prolonged conflict and damage to the region's oil infrastructure would also deepen global food insecurity by disrupting shipments of fertilizers, helium and sulphur needed for agriculture, triggering secondary effects that could include higher interest rates.

He warned that poorer countries that have yet to recover fully from the COVID-19 pandemic could face worsening food insecurity, while heavily indebted countries would be hit by rising borrowing costs as interest rates increase, placing additional pressure on spending for education, healthcare and other essential public services.

"Once inflation accelerates, it may take only a few months before heavily indebted countries face serious difficulties in meeting their debt-service obligations," Gill said.

The World Bank's June projections showed that 40% of low- and middle-income countries are already in debt distress or face a high risk of falling into it.

Gill said this currently applies to 32 countries but warned that the number could rise rapidly if interest rates continue to increase.

//Petra// AF