THE International Monetary Fund (IMF) issued a warning about the global economy.
The world is on the edge of geo-economic fragmentation, and it could add more cold water to the world’s already anemic global growth.
This is the warning issued by Kristalina Georgieva, the managing director of the IMF, during an economic forum in Brussels.
“After decades of increasing global integration, there is a growing risk that the world may split into rival economic blocs. And that’s a scenario that would be bad for everyone, including for people in Europe. We project global growth will remain around 3% over the next five years—our lowest medium-term forecast since 1990,” said Kristalina Georgieva, IMF Managing Director.
The IMF chief called for cooperation amid the extremely weak growth seen across the globe by historical standards, warning about a growing risk that the world may split into rival economic blocs.
“And yet, central bankers cannot take their eyes off the ball until stubborn inflation is firmly under control. The required monetary tightening is weighing on growth and exposing some financial vulnerabilities. On top of it geo-economics fragmentation risks throwing cold water on already weakened global growth,” Georgieva added.
Georgieva said reviving multilateral cooperation is vital for long-term growth and that Russia’s invasion of Ukraine added national security concerns to investment decisions of countries.
But taken together, the IMF chief said these trends are creating a more fragmented world with real economic costs.
She also warned that trade fragmentation could cost up to 7% of the global economy in the long term, which is roughly equivalent to the combined annual output of Germany and Japan.
The IMF chief had previously said that the shocks over the past few years, including the pandemic, the conflict between Russia and Ukraine, and the spike in interest years after years of loose monetary policy have been a drag on the global economy.
She also likely previously warned that rejecting globalization for rival trade alliances would end badly and that allowing global economy to split into trade blocs could trigger another cold war.
