According to the IMF, the world will be divided into three economic blocks

The world economy has been divided into three blocks: those aligned with the United States, China and isolated countries, First Deputy Director of the IMF Gita Gopinath said during a speech at Stanford University, RBC reports.

She noted the increasing separation of the global economy, pointing out that China’s share of US imports decreased by 8 percentage points. over the past six years due to trade disputes, and the US share of China’s imports has fallen by 4%. She also added that direct trade between Russia and Western countries has fallen sharply since the introduction of sanctions.

In addition, Gopinath said that Mexico and Vietnam are intermediate countries through which some trade and investment are redirected, which somewhat compensates for the destruction of direct ties between Beijing and Washington.

The economist pointed out the risks of trade and financial fragmentation, which included:

  • decreased efficiency due to Chinese influence;
  • reduction in cross-border capital flows;
  • difficulty accumulating capital;
  • weakening international risk sharing;
  • increase in macro-financial instability.

In addition, the global payment system and foreign exchange reserves may become more fragmented, Gopinath said. She proposed several steps to combat this, including the formation of a reliable rules-based global trading system, as well as the creation of a stable international monetary system. However, she noted that the reality is far from these ideals and the need now is to focus on limiting the negative consequences of unilateral political actions, such as industrial policy, through greater transparency, data sharing and policy dialogue.