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WASHINGTON, Jan 15 (Reuters) – Severe fragmentation of the global economy after decades of increasing economic integration could reduce global economic output by up to 7 percent, but losses could reach 8-12 percent in some countries if technology also shuts down. , it is said in the new report of the staff of the International Monetary Fund.

The IMF said that even limited fragmentation could reduce global GDP by 0.2%, but noted that more work is needed to estimate the estimated costs for the international monetary system and the Global Financial Safety Net (GFSN). :

A note released late Sunday said global flows of goods and capital had leveled off since the global financial crisis of 2008-2009 and the rise of trade restrictions in subsequent years.

“The COVID-19 pandemic and Russia’s invasion of Ukraine have further tested international relations and increased skepticism about the benefits of globalization,” the staff report said.

It says deepening trade ties have led to significant reductions in global poverty over the years, while benefiting low-income consumers in advanced economies through lower prices.

The breakdown of trade ties would “most adversely affect low-income countries and less well-off consumers in advanced economies,” the report said.

Restrictions on cross-border migration will deprive host economies of valuable skills while reducing remittances in migrant-sending economies. Reduced capital flows will reduce foreign direct investment, while a decline in international cooperation will create risks to the provision of vital public goods globally.

The IMF says existing studies show that the deeper the fragmentation, the deeper the costs, with technological disconnection significantly increasing losses from trade restrictions.

It notes that emerging market economies and low-income countries are likely to be most at risk as the global economy moves towards more “financial regionalisation” and a fragmented global payments system.

“With less international risk sharing, (global economic fragmentation) could lead to higher macroeconomic volatility, more severe crises and greater pressures on national buffers,” the report said.

It could also weaken the global community’s ability to support countries in crisis and complicate the resolution of future sovereign debt crises.

Reporting by Andrea Shallal; Editing by Daniel Wallis

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