Fragmentation Could Drop Global Growth by 7%, IMF Says

The International Monetary Fund (IMF) said after decades of global economic integration, a severe fragmentation could hurt global economic growth by 7%, and 8-12% for some countries, if technology is also decoupled. 


The IMF said that even with a limited fragmentation, it could cut global output by 0.2%, while saying that some further work is required to evaluate and calculate cost to the international monetary system and the global financial safety net (GFSN).


According to the statement released by the IMF on Sunday, it noted that the flows of global goods and capital had leveled off after the financial crisis in 2008-2009. Meanwhile, an increase in trading restrictions will be more in the next couple of years. The epidemic of Covid-19 and Ukraine invasion by Russia also tested global relations.


The deepening of trade has benefited the reduction of the world’s poverty for many years as well as low-income consumers in developed countries through cheaper prices. In addition, the unraveling in global trade could have a negative impact on low-income countries and less well-off consumers in developed countries.


The IMF said the existing studies represented the deep fragmentation, deep costs and technology decoupling are the factors that fueled loss from trade restrictions.