ECB experts predicted a decline in global wealth to 15.2% due to fragmentation

The division of the world into opposing blocs of countries will lead to a drop in global welfare, or, in other words, consumption, by 2.3-15.2% (Gross national expentiture, GNE), inflation acceleration by 2.3-12% and a decrease in real imports (total household spending on imported products) by 9–44%. Such estimates were given by the experts of the European Central Bank (ECB) in the report “Economic costs associated with the disruption of supply chains.” The scale of the problems will depend on the scenario; in total, the ECB identifies four alternatives.

Countries can be divided into two blocks: West – USA (North America, Europe and Australia) and East – China (Southeast Asia, Eurasia excluding Europe, Africa and South America). The authors of the report base this division on the similarity of votes that countries give at the UN General Assembly. Fragmentation can also take place on the basis of free trade areas (FTZ): Comprehensive Regional Economic Partnership (RCEP), USMCA (USA – Canada – Mexico), Mercosur (single South American market) and the eurozone. Countries that are not included in these zones are recognized by the ECB as neutral, that is, they do not create trade restrictions for other neutral economies. The authors of the report justify the likelihood of such a division by the disagreements that arise between states within political blocs.