The IMF warns of a fragmentation of the world economy due to the war in Ukraine

The International Monetary Fund (IMF) warned on Wednesday of a possible fragmentation of the world economy by which countries restrict their trade relations with their partners or allies, as a result of the Russian invasion of Ukraine.

In a virtual press conference in the framework of the spring assembly that the financial entity is holding this week, the managing director of the fund, Kristalina Georgieva, praised the benefits of globalization in recent decades and lamented the signs of a change of direction that are taking place in the global economy.

Georgieva stressed that the global gross domestic product (GDP) has tripled since 1990 and that the benefits have accrued, above all, to developing countries, which now have an economy 4.5 times larger than it was then.

In addition, as explained by the managing director of the institution, poverty has been reduced considerably.

“The irony is that a more fragmented world requires more cooperation to prevent gigantic risks from materializing,” he said.

The commercial withdrawal of the countries goes beyond the sanctions implemented by the West against Russia for its invasion of Ukraine and is part of a pattern of progressive commercial divergence between the bloc of democracies, made up of the US, Europe and the United States, among others. Japan, and that of authoritarian regimes, which includes Russia and China.

Georgieva assured that the IMF makes it a priority to provide objective analyzes of the benefits of cooperation and the risks of fragmentation.

“This is a difficult time and very disturbing events are taking place, but we are interdependent and the need for cooperation is very strong,” said the economist, who said she never imagined that she would see a war of these dimensions in Europe again.

However, as director of an institution with 190 member countries, she assured that she could attest that although cooperation is more difficult when there are tensions, this “is not impossible” and important decisions can continue to be made.

The IMF published on Tuesday an update of its economic growth projections for 2022 and the coming years, which for the first time reflect the impact of the war in Ukraine and according to which the vast majority of countries will experience a lower growth rate than expected. anticipated before the conflict.

This Wednesday was the turn of the entity’s “fiscal surveillance” report, in which it projects the evolution of the public deficit or surplus for each country and the ratio between public debt and GDP.

For Latin American countries, the IMF forecasts that 2022 will close with an average deficit of 4.7% of GDP, which will be reduced to 4.2% in 2023 and 3.4% in 2024.

Within the region, the Fund expects large variations for 2022, ranging from 7.6% forecast for Brazil to 1.5% for Chile, passing through 3.2% for Mexico, 3.8% for Argentina, a 2.4% for Peru, 4.6% for Colombia, 2.7% for the Dominican Republic and 2.5% for Uruguay.

“The projections for most Latin American countries point to much lower deficits than in 2020, due to the end of the exceptional fiscal measures decreed by the pandemic and the return of economic growth and therefore of tax revenue,” he said in an interview with Efe Paolo Mauro, deputy director of the Department of Financial Affairs of the IMF.

Regarding the weight of public debt with respect to GDP, the IMF projects that this will stand at an average of 71.7% in the region in 2022, and will remain stable around this figure for the following five years.

For Spain, the financial institution projects a deficit of 5.3% of GDP in 2022; 4.3% in 2023 and 3.9% in 2024, in addition to closing this year with a debt/GDP ratio of 116.4%.

In the rest of the world, the IMF projects that the United States will close 2022 with a public deficit of 4.8%; the euro zone, 4.3%; the United Kingdom, 4.3%; China, 7.7%; Japan, 7.8%, and India, 9.9%. (I)