Wef alarm, global economic fragmentation costs up to $300 billion
"In an escalation scenario, losses could reach $6.9 trillion, or 6.4 per cent of global GDP, more than the entire economy of any country except the US and China," reads the World Economic Forum's 'Deepening Divides' report
The two-year period 2025-2026 marked "a turning point for global trade and finance", with economic and financial fragmentation costing, in the main scenario, between $213 and $307 billion a year to the world economy and no longer just affecting traditional geopolitical 'rivals' but splitting traditionally allied economies such as the US, EU, Canada, Japan and South Korea. This is stated in the 'Deepening Divides' report by the World Economic Forum, according to which geo-economic fragmentation, in addition to its impact on GDP, adds 0.2-0.3 percentage points to global inflation.
"In an escalation scenario, losses could reach $6.9 trillion, or 6.4% of global GDP, more than the entire economy of any country except the US and China," it reads. In an extreme scenario, countries outside the major geopolitical blocs, especially emerging economies, would suffer declines of 10.7%, against a global average of 6.4%. Fragmentation also erodes purchasing power, with the US among the hardest hit in terms of real wages. The report by the association that organises the Davos meetings proposes five actions to limit the damage: stricter rules for economic governance, a more predictable political climate and greater interoperability between payment systems and digital currencies.
