Global economic losses from increased fragmentation could lead to a 7% reduction in global GDP.
The fragmentation of the world economy, caused by a set of problems, can lead to a significant reduction in global GDP. This was stated in the report of the head of the International Monetary Fund, Kristalina Georgieva, published on January 16.
“Despite the fact that we need more international cooperation in many fields, we face the specter of a new cold war that could lead to the disintegration of the world into rival economic blocs. It is a collective mistake to policy that will make everyone poorer and less protected,” said the IMF Managing Director.
Since the end of the Cold War, the global economy has roughly tripled in size, he said, and nearly 1.5 billion people have been lifted out of extreme poverty.
“This dividend of peace and cooperation should not be overlooked,” Georgieva said.
The IMF estimates that the long-term cost of global trade fragmentation could range from 0.2% to 7% of global GDP under extreme circumstances. At the same time, some countries could lose up to 12% of GDP.
Disruption of trade relations would affect low-income countries and less affluent consumers in advanced economies “in the worst possible way,” the fund said.
The report notes that global fragmentation has been severely affected by the war in Ukraine and the COVID-19 pandemic, which has caused international disruptions in financial, food and energy supplies.
The IMF recommends three ways to address the problem: strengthening the international trading system, helping vulnerable countries deal with their debt problems, and strengthening action on climate change.
It will be recalled that the World Bank sharply lowered its economic growth forecasts for most countries and warned that new shocks could lead the global economy into recession.
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Source: korrespondent
I’m Liza Grey, an experienced news writer and author at the Buna Times. I specialize in writing about economic issues, with a focus on uncovering stories that have a positive impact on society. With over seven years of experience in the news industry, I am highly knowledgeable about current events and the ways in which they affect our daily lives.