1.5% of the world’s GDP is at stake in a potential trade bloc split-IMF chief warns.

The chief executive of the International Monetary Fund has predicted that trade barriers will cost a world economy burdened by inflation and growing food insecurity an additional $1.3trillion. 

On the sidelines of the Asia-Pacific Economic Cooperation leaders meeting in Bangkok last week, Kristalina Georgieva warned of increased separation, saying the costs would be high.

“The world will lose 1.5 percent of its GDP just because of the split, which could divide us into two trading blocs.” It’s 1.3trillion dollars,” she told Bloomberg Television.

Georgieva said the potential loss could be double, or more than 3 percent of GDP, in Asian countries, the center of global value chains for electronics, clothing, and industrial goods.

The head of the International Monetary Fund called on Asian countries to work together to maintain economic growth, saying they are better placed to deal with economic shocks thanks to significant reserves and cooperation in the region.

“Add to that the fragmentation of the global economy; it adds fuel to the fire,” she said. “No one benefits from this.”

Georgieva emphasized that the war in Ukraine is still the main reason why the world economy is witnessing such major losses.
“The most damaging factor in the world economy is war,” he said. “The sooner the war ends, the better.”

In 2018, the former president of the United States, Donald Trump, began to impose tariffs on imports from China, and the United States and China began to become more independent.

US President Joe Biden has announced that he is considering removing some of President Trump’s tariffs on hundreds of billions of dollars worth of Chinese goods.

Biden met with Chinese President Xi Jinping at the G20 summit in Bali last week. Although there were no watershed successes, the Biden-Xi meeting produced a long-awaited, albeit modest, victory for both sides.

“Disorders continue to confront us. But it is clear that if we invest in climate-resilient agriculture and low-carbon development, we can improve the lives of people everywhere” said Georgieva.

In a blog prepared for the G20 summit in Indonesia, the IMF described the outlook for the global economy as “bleak,” lamenting a bleaker outlook for monetary policy tightening caused by persistently high and widespread inflation, weak growth in China, and persistent supply and food disruptions. 

The uncertainty caused by the Russian invasion of Ukraine’s recent purchasing managers’ indexes, which measure manufacturing and service activity, showed weakness in most major G20 countries, with economic activity slowing as inflation remained stubbornly high.

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