IMF expects GDP of some countries to fall by 12% due to fragmentation of the global economy

Some countries could lose up to 12% of GDP due to the fragmentation of the global economy in the long term, IMF head Kristalina Georgieva said at press conferences.

“In the long run, the cost of trade fragmentation alone could be as high as 7% of global GDP. If we add to this the division in the technological sphere, then some countries may lose up to 12% of GDP. The fragmentation of capital flows, including foreign direct investment, will be another blow to global economic growth,” Ms. Georgieva said.

The head of the IMF recalled that, according to the April macro forecast of the Monetary Fund, in 2023 the growth rate of the global economy will slow down to 2.8% (from 3.4% in 2022), in 2024 it will level off to 3%. According to Ms. Georgieva, this is the IMF’s worst medium-term forecast in decades.

She noted that the negative outlook is due to the fact that core inflation “stubbornly” remains high, geopolitical factors retain their influence on the global economy, and economic fragmentation is bad for trade flows.

According to the April IMF review, the current risks of deglobalization could intensify, leading to fragmentation in trade and finance, and in turn causing rates to fall in developing countries and increase in developed ones. The organization called on countries to act in a consolidated way so as not to increase the ongoing fragmentation.

Read more about the IMF forecast in the material “Money comes back to normal”.

Erdni Kagaltynov