A severe fragmentation of the global economy after decades of increasing economic integration could reduce global economic output by up to 7 percent, but the losses could reach 8 to 12 percent in some countries if technology is also decoupled, the IMF said in a new staff report.
The IMF said even limited fragmentation could shave 0.2 percent off of global GDP, but said more work was needed to assess the estimated costs to the international monetary system and the global financial safety net.
The note, released on Sunday, said that the global flows of goods and capital had leveled off after the global financial crisis of 2008-2009, and a surge in trade restrictions seen in subsequent years.
Photo: Bloomberg
“The COVID-19 pandemic and Russia’s invasion of Ukraine have further tested international relations and increased skepticism about the benefits of globalization,” the staff report said.
It said deepening trade ties had resulted in a large reduction in global poverty for years, while benefiting low-income consumers in advanced economies through lower prices.
The unraveling of trade links “would most adversely impact low-income countries and less well-off consumers in advanced economies,” it said.
Restrictions on cross-border migration would deprive host economies of valuable skills while reducing remittances in migrant-sending economies. Reduced capital flows would shrink foreign direct investment, while a decline in international cooperation would pose risks to provision of vital global public goods.
The IMF said studies suggested that the deeper the fragmentation, the deeper the costs, with technological decoupling significantly amplifying losses from trade restrictions.
It said that emerging-market economies and low-income countries are likely to be most at risk as the global economy shifted to more “financial regionalization” and a fragmented global payment system.
“With less international risk-sharing, [global economic fragmentation] could lead to higher macroeconomic volatility, more severe crises, and greater pressures on national buffers,” it said.
It could also weaken the ability of the global community to support countries in crisis and complicate the resolution of sovereign debt crises.
PRICE HIKES: The war in the Middle East would not significantly disrupt supply in the short term, but semiconductor companies are facing price surges for materials Taiwan’s semiconductor companies are not facing imminent supply disruptions of essential chemicals or raw materials due to the war in the Middle East, but surges in material costs loom large, industry association SEMI Taiwan said yesterday. The association’s comments came amid growing concerns that supplies of helium and other key raw materials used in semiconductor production could become a choke point after Qatar shut down its liquefied natural gas (LNG) production and helium output earlier this month due to the conflict. Qatar is the second-largest LNG supplier in the world and accounts for about 33 percent of global helium output. Helium is
DOMESTIC COMPONENT: Huang identified several Taiwanese partners to be a key part of Nvidia’s Vera Rubin supply chain, including Asustek, Hon Hai and Wistron Nvidia Corp chief executive officer Jensen Huang (黃仁勳), addressing crowds at the company’s biggest annual event, unveiled a variety of new products while predicting that its flagship artificial intelligence (AI) processors would help generate US$1 trillion in sales through next year. During a two-and-a-half-hour keynote address, Huang announced plans to push deeper into central processing units (CPUs) — Intel Corp’s home turf — and introduced semiconductors made with technology acquired from start-up Groq Inc. The company even said it was developing chips for data centers in outer space. At the heart of Huang’s speech was the message that demand for computing power
OPTIMISTIC: Inflation still has a chance of remaining below the central bank’s 2 percent alert level, as Taiwan’s economy is resilient with healthy exports, the NDC minister said Taiwan’s inflation could exceed 2 percent this year if oil prices continue to surge amid escalating tensions in the Middle East, prompting the government to reassess its economic outlook, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. DGBAS Minister Chen Shu-tzu (陳淑姿) told lawmakers at a meeting of the legislature’s Finance Committee that the agency’s earlier growth forecast of 1.68 percent in the consumer price index (CPI) and 7.71 percent for GDP this year did not account for the ongoing Middle East conflict and would need revision, if tensions persist. The previous forecast assumed an average international crude price of
ELECTRIC DREAMS: Smart cities would use ‘virtual power plants,’ which integrate idle electricity use from households, businesses and factories, Asustek said Asustek Computer Inc (華碩) yesterday showcased key components of its artificial intelligence (AI)-driven smart city initiatives at a trade show in Taipei, eyeing new business opportunities as cities develop sovereign AI infrastructure. Advances in generative, multimodal and physical AI are driving cities toward a new phase of “sovereign AI,” Asustek cochief executive officer Samson Hu (胡書賓) told reporters on the sidelines of the Smart City Summit and Expo at Taipei Nangang Exhibition Center’s Hall 2. The company showcased its “AI City” framework, which comprises three layers — computing infrastructure centered on AI servers, AI models and a platform layer for data processing
RSS