By David Lawder
SAN FRANCISCO (Reuters) -International Monetary Fund Managing Director Kristalina Georgieva said on Friday this week's meeting between U.S. President Joe&nbsp;Biden&nbsp;and Chinese President&nbsp;Xi&nbsp;Jinping is a badly needed&nbsp;signal&nbsp;that the&nbsp;world&nbsp;needs to&nbsp;cooperate&nbsp;more.
"It sends a&nbsp;signal&nbsp;to the rest of the&nbsp;world&nbsp;that we must find ways to&nbsp;cooperate&nbsp;on those challenges where no country on its own can succeed," Georgieva told Reuters in an interview on the sidelines of the Asia-Pacific Economic Cooperation summit.
The&nbsp;Biden-Xi&nbsp;meeting is "important&nbsp;at a time when geo-economic fragmentation has indeed deepened with negative consequences for the prospects for accelerating growth," Georgieva said.
Biden&nbsp;and&nbsp;Xi&nbsp;agreed on Wednesday to open a presidential hotline, resume military-to-military communications and work to curb fentanyl production, showing tangible progress in their first face-to-face talks in a year.
The meeting did not alter a growing array of national security-driven trade and investment restrictions between the&nbsp;world's two largest economies, but Georgieva said the resumption of communications was&nbsp;important&nbsp;at a very uncertain time for the global economy.
Georgieva said the U.S.-China thaw had a positive effect on leaders at the APEC summit, where her key takeaway was that "the spirit of cooperation is demonstrably stronger. And the&nbsp;world&nbsp;does need it."
Georgieva said revived U.S.-China communications will also help foster cooperation on global challenges, especially climate change, with the COP28 climate conference due to start at the end of November.
U.S.-China&nbsp;engagement&nbsp;also will be an&nbsp;important&nbsp;factor on negotiations over&nbsp;World&nbsp;Trade Organization reform, including restoration of its dispute settlement system. WTO ministers are due to meet in February in the United Arab Emirates.
GAZA WAR IMPACT
Israel's war against Hamas continues to be "devastating" for the population and economy of Gaza, with "severe impacts" on the West Bank's economy, Georgieva said as well.
It is also putting pressure on the neighboring economies of Egypt, Lebanon and Jordan, which are seeing reduced tourism and higher gas costs, she said.
Israel, too, will see an economic slowdown, as nearly 8% of its workforce has been diverted to military service, she said.
For Egypt, the&nbsp;IMF&nbsp;is "seriously considering" a possible augmentation of the country's $3 billion loan program due to economic difficulties posed by the Israel-Hamas war. An&nbsp;IMF&nbsp;staff team is currently holding virtual consultations with Egyptian authorities on the program.
The Israel-Hamas war has had "a very, very limited impact" on the global economy as an initial run-up in energy prices was not sustained, but impacts could grow if there's an "accident" that widens the conflict or it is prolonged, Georgieva said.
"We are already seeing the impact of antisemitism and Islamophobia, raising their ugly heads all over the&nbsp;world. The sooner this war ends, the better," she said.
IMF&nbsp;SHAREHOLDING REFORMS
U.S. Treasury Secretary Janet Yellen said during meetings last week with her Chinese counterpart that a key outcome of U.S.-China economic&nbsp;engagement&nbsp;was Beijing's support for a 50% increase in&nbsp;IMF&nbsp;quota-based resources, without an immediate rise in shareholding for China.
Georgieva said it was&nbsp;important&nbsp;for the&nbsp;IMF&nbsp;to start quickly on revamping its shareholding formula to boost the representation of fast-growing developing economies: "The&nbsp;world&nbsp;needs an&nbsp;IMF&nbsp;that is financially strong, and that is also legitimate."
(Reporting by David Lawder; Editing by Chris Reese and Tom Hogue)

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IMF chief says Biden-Xi engagement an important signal for world to cooperate