The confrontation between America and China may lead to “the fragmentation of the world” and an increase in poverty
The International Monetary Fund warned that the geopolitical fragmentation resulting from the confrontation between the United States and China could lead to “the fragmentation of the world” and poverty in it.
In its report on “Prospects for the Development of the Global Economy,” the fund said that the division of the world into two blocs centered on the United States and China may cause companies to transfer production to the jurisdictions of the most friendly countries in order to avoid supply chain problems amid geopolitical contradictions, and such a development of events will lead to To a decline in world production by 1% in the next 5 years and by 2% in the long term.
The fund added, “It is likely that the fragmented world will be poorer, although some players may obtain relative or even absolute benefits as a result, but these benefits will be subject to the absence of guarantees and instability.”
Fund experts say that the first effects of the crisis in relations between Washington and Beijing began to appear since 2020, when foreign direct investment decreased from the second to the fourth quarter by 20% compared to pre-pandemic levels.
And the tensions between the United States and China, according to experts, can affect the banking system severely, as it will lead to disruptions in supply chains and accelerate inflation, and this may lead to forcing banks to take less risks and reduce lending, which will lead to a further slowdown in economic growth.
This and the risk analysis conducted by the International Monetary Fund has become “one of the loudest warnings” of global economic damage since the Corona virus pandemic, according to “Bloomberg” agency.
The International Monetary Fund has cut its global growth forecast, since October 2021, three times, and according to the latest data, the Fund expects that global GDP growth will slow to 2.7% this year.