In the face of unexpected global events, economies across the world need to foster resilience both individually and collectively. It's essential to prioritize collaboration, as heightened protectionism could potentially lead to economic fragmentation or divisions among nations, particularly at times when the world's economic vulnerability is evident.
Analyses indicate that if international trade restrictions were to intensify, the global economic output might experience a decrease of up to 7 percent in the long run. This translates to roughly $7.4 trillion based on the current value of money, an amount akin to combining the economies of France and Germany, and threefold the annual production of sub-Saharan Africa.
The need for intentional global collaboration is evident now more than ever. International bodies hold a pivotal position in this scenario, uniting countries to collaboratively address universal challenges. This sentiment is echoed by IMF Managing Director Kristalina Georgieva in her recent contribution to Foreign Affairs.
However, there have been indications of waning cooperation. Data illustrates that the establishment of new trade barriers every year has witnessed a near threefold increase since 2019, reaching close to 3,000 in the previous year.
Other manifestations of fragmentation, including technological divisions, interrupted capital circulations, and limitations on migration, are likely to escalate costs. Furthermore, the movement of goods and capital on a global scale has plateaued post the international financial crisis. Studies from the IMF suggest that geopolitical orientations are progressively impacting both direct foreign investments and the flow of portfolios.
The IMF remains committed to emphasizing that the global community, buttressed by international institutions, should advocate for concrete advancements in areas of shared interests and perpetuate cooperative endeavors where non-action could have severe consequences.
Emphasizing the importance of global cooperation, Georgieva comments in Foreign Affairs, "Decision-makers should concentrate on subjects of paramount significance not just to national economies but also to the financial welfare of the general populace. It's imperative to cultivate trust among nations, ensuring swift collaborative actions when confronted with significant future disruptions."