The International Monetary Fund (IMF) has cautioned that global trade restrictions have almost tripled over the past four years, according to Gita Gopinath, IMF First Deputy Managing Director, as reported by Sputnik.
“Almost 3,000 restrictions were imposed just last year — nearly 3 times the number imposed in 2019,” Gopinath announced at a conference hosted by the South African Reserve Bank.
Gopinath further explained that foreign direct investment is increasingly motivated by geopolitical considerations rather than geographic proximity. She noted that this points to an “increasingly fragmented world.”
She stated that different nations would experience varied consequences due to this fragmentation.
“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,” said Gopinath.
She added that other emerging markets could suffer output losses exceeding 10 per cent of GDP.
Moreover, Gopinath issued a warning that the fragmentation of foreign direct investment would exacerbate the situation, with developing countries standing to face the most severe repercussions.
Gopinath encouraged countries to bolster their resilience to geo-economic fragmentation by diversifying and implementing reforms. She also recommended that companies invest in modernising crucial infrastructure and undertake stress tests to prepare for future upheavals.