FX.co ★ IMF predicts global economy to split into two trade blocs

The International Monetary Fund (IMF) has proposed a remarkable classification concerning the global economy. According to the organization, the world is poised to split into two major trade blocs. IMF analysts have modeled a scenario where the global economy is divided into two distinct trading entities: one comprising China and Russia, and the other including EU countries and the US. Preliminary assessments suggest minimal intersection between these blocs, with representatives likely not engaging with each other. The IMF specialists opine that one global trade bloc will be led by Moscow and Beijing, while Washington and the European Union representatives will spearhead the other. The reasons for this divide are attributed not only to geopolitical conflicts but also to trade restrictions and competition over commodities markets. Recent limitations in critical sectors like commodities and semiconductors - considered vital for national security and strategic competition - highlight this shift, the IMF notes. The rivalry in these areas often overshadows the benefits of global economic integration and mutual trade, experts warn. The end of the 20th century saw the removal of some global trade barriers, but the last decade has witnessed a reversal, leading to a fragmented world economy. The COVID-19 pandemic further exacerbated this, bringing trade restrictions to the forefront in many countries. Experts are struggling to determine who benefits from the world's division into trade blocs. However, the IMF warns that limiting access to export markets will likely lead to shortages and higher prices for most goods. As for the Russia-China bloc, it boasts vast reserves of energy resources, rare earth metals, and uranium. However, this trading group may face shortages in cobalt, nickel, copper, palm oil, soy, as well as printed circuit boards and modern microchips - commodities predominantly produced by the Atlantic bloc. The World Trade Organization (WTO) has previously stated that if the global economy splits into two trading blocs, the world's GDP could decline by 5% in the long term.