IMF’s Gopinath warns fragmentation of global economy could cut GDP by 7%

WASHINGTON: The International Monetary Fund’s No. 2 official on Monday warned that fragmentation in the global economy and clear shifts in underlying bilateral trade could trigger a “new Cold War” given the Ukraine war and tensions between the United States and China.

First Deputy Managing Director Gita Gopinath told the International Economic Association in Medellin, Colombia, that losses could reach 2.5% to 7% of global gross domestic product if the world economy fragmented into two blocs.

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“While there are no signs of broad-based retreat from globalization, fault lines are emerging as geoeconomic fragmentation is increasingly a reality,” she said in prepared remarks. “If fragmentation deepens, we could find ourselves in a new Cold War.”