In a new staff report published on Sunday, the International Monetary Fund (IMF) said that a severe economic fragmentation of the global could cost global Gross Domestic Output up to 7.0% but the losses could reach 8-12% in some countries if technology is also decoupled.
Additional takeaways
“Even limited fragmentation could shave 0.2% off of global GDP, but said more work was needed to assess the estimated costs to the international monetary system and the global financial safety net (GFSN).”
“The COVID-19 pandemic and Russia’s invasion of Ukraine have further tested international relations and increased skepticism about the benefits of globalization.”
The unraveling of trade links “would most adversely impact low-income countries and less well-off consumers in advanced economies.”
Market reaction
The above report has little to no impact on the market sentiment, reflective of the 0.20% gains in the US S&P 500 futures.