IMF’s Gopinath warns fragmentation of the global economy could cut GDP by 7%. The fragmentation of the global economy and obvious changes in fundamental bilateral trade have led the second-highest official of the International Monetary Fund to issue a warning that a “new Cold War” could break out. This warning was made in light of the conflict in Ukraine and the tensions between the United States and China.
According to statements made by First Deputy Managing Director Gita Gopinath to the International Economic Association in Medellin, Colombia, losses may amount to between 2.5 and 7 percent of the gross domestic product of the entire globe if the global economy were to be divided into two distinct groups.
“While there are no signs of a broad-based retreat from globalization, fault lines are emerging as geoeconomic fragmentation becomes increasingly a reality,” she stated during her prepared remarks. “If fragmentation deepens, we could find ourselves in a new Cold War.”
It is impossible to overstate the dangers that a divided global economy poses. The International Monetary Fund (IMF) has stated that immediate attention and concerted effort are necessary to address the threat of a 7% decline in GDP. To mitigate the negative consequences of fragmentation, it is necessary to make concerted efforts, implement proactive policies, and maintain a solid commitment to creating economic resilience on a multinational scale.
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