RIYADH: Trade barriers are set to cost the global economy, already beleaguered by stifling inflation levels and growing levels of food insecurity, a further 1.4 trillion, the International Monetary Fund's managing director has forecast.
Speaking on the sidelines of the Asia-Pacific Economic Cooperation leaders’ meeting in Bangkok last week, Kristalina Georgieva warned against increased division, saying that costs would be severe.
“The world is going to lose 1.5 percent of gross domestic product just because of division that may split us into two trading blocs. This is $1.4 trillion,” she told Bloomberg Television.
Georgieva said that for Asian countries, the center of global value chains for electronics, apparel and industrial goods, the potential loss could be twice as bad, or more than 3 percent of GDP.
The IMF chief urged Asian countries to work together to maintain growth as she said they are better equipped to face economic shocks, thanks to significant reserves and cooperation within the region.
“If we add on top of it the fragmentation in the world’s economy, it will be throwing gasoline on a fire,” she said. “Nobody will benefit from it.”
Georgieva highlighted the war in Ukraine still constitutes as the main factor the global economy is witnessing such significant damage.
“The single most damaging factor for the world economy is the war,” she said. “The sooner the war ends, the better.”
In 2018 former US President Donald Trump began imposing tariffs on imports from China and the US and China began to become more independent.
US President Joe Biden has said he is considering removing some of the tariffs imposed on hundreds of billions of dollars' worth of Chinese goods by Trump.
Biden met with Chinese Presidident Xi Jinping at last week’s G20 summit in Bali. While there were no watershed breakthroughs, the Biden-Xi meeting brought each side long-sought, if modest, gains.
In a blog prepared for the Indonisian G20 summit, the IMF labelled the global economic outlook gloomy, lamed the darker outlook on tightening monetary policy triggered by persistently high and broad-based inflation, weak growth momentum in China, and ongoing supply disruptions and food insecurity caused by Russia’s invasion of Ukraine.
It said recent purchasing manager indices that gauge manufacturing and services activity signaled weakness in most G20 major economies, with economic activity set to contract while inflation remained stubbornly high.