January 17, 2023: The International Monetary Fund stated that fragmentation could cost the economy to increase to 7% of GDP in new description.

On Sunday, the longer-term cost of trade fragmentation varies from 0.2% of global output to nearly 7%, roughly the combined annual work of Germany and Japan, according to the report published, which outlines a “Gordian knot of ideas” that policymakers express today.

The research needs to state how extended the fragmentation could take to impact the growth of this magnitude.

That depends on the definition of “fragmentation,” some forecasts by the IMF are even bleaker. Estimates that include a technological disconnect amid regions suggest that countries could lose up to 12% of their GDP.

The IMF lists several factors contributing to increasing global fragmentation, which include Russia’s invasion of Ukraine and the Covid-19 pandemic.

Both situations have caused international disruption to be financial, food and energy supplies, with additional trading districts adding to the regions’ discord.

“The risk is that policy interventions assumed in the name of economic or national security have unintended influences, or they could be used deliberately for economic gaining at the expense of others,” the report stated.

It lists restrictions on cross-border migrations, reduced capital flows and a refusal of international cooperation as different types of fragmentation.