Washington, Sept 1 : The International Monetary Fund (IMF) warns that the volume of global trade restrictions has nearly tripled in the last four years, IMF First Deputy Managing Director Gita Gopinath said on Friday.
“Almost 3,000 restrictions were imposed just last year – nearly 3 times the number imposed in 2019,” Gopinath said at the South African Reserve Bank conference.
Gopinath said foreign direct investment is now increasingly driven by geopolitical preference rather than geographic distance, adding that such a situation signals an “increasingly fragmented world.”
Different countries would face various effects of fragmentation, she said.
“Our simulations of the impact of trade fragmentation find that while a few EMs could benefit, most will lose – including South Africa, with a hit of 5 per cent of GDP,” Gopinath said.
However, other emerging markets could face output losses of over 10 per cent of GDP, she said.
Gopinath also warned that foreign direct investment fragmentation would worsen the situation, and developing countries would face the most serious consequences of that situation.
Gopinath called on states to enhance resilience to geo-economic fragmentation through diversification and reforms.
She urged firms to upgrade and modernise critical infrastructure and conduct stress tests that would help to prepare for future shocks.
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