IMF: the damage from the fragmentation of the global economy could be up to 7% of global GDP

The damage from the fragmentation of the global economy could range from 0.2% to 7% of global GDP, according to the report of the International Monetary Fund (IMF). According to experts, in some countries the economy may fall by 8-12%, reports Reuters with a link to the document.

According to the IMF, global flows of goods and capital have leveled off since the global financial crisis of 2008-2009. However, the coronavirus pandemic and the Russian military operation in Ukraine “became an additional test for international relations and increased skepticism about the benefits of globalization.”

Experts point out that deepening trade links have led to significant reductions in global poverty, while benefiting low-income consumers in advanced economies. However, restrictions on cross-border migration threaten to deprive host countries of “valuable skills” and reduce remittances to migrants’ countries of origin. In addition, reduced capital flows will reduce foreign direct investment, and the withdrawal of international cooperation “creates risks to the provision of vital global public goods.”

As the IMF notes, “the deeper the fragmentation, the higher the costs”, and technological separation will significantly increase the losses from trade restrictions. Low-income countries will be most at risk as the global economy moves towards “financial regionalization” and a “fragmented global payment system.” “With less risk sharing at the international level (fragmentation.— “b”) could lead to higher macroeconomic volatility, more severe crises and more pressure on national reserves,” the experts added.

IMF warnedthat the military actions in Ukraine, the increase in interest rates by regulators in developed countries and the consequences of the COVID-19 pandemic could provoke a slowdown in global GDP growth in 2023. In October, the fund downgraded its estimate of global GDP growth from 2.9% to 2.7% and said it could continue the decline.

On the dynamics of the world economy – in the material “Kommersant” “European inflation fell by winter”.

Laura Keffer