Including turning and threatening trade .. This is the greatest risk to the global economy

The increasing geopolitical tensions exacerbate the fragmentation and disintegration of the global financial system and pose a threat to global prosperity and human progress, which puts the world in front of great risks, most notably the state of global fragmentation and the threat of international trade, according to the European “Eurinos” network.

The financial system crushed

According to the recently issued World Economic Forum report entitled “Confronting the fragmentation of the global financial system”, the economic costs of global fragmentation may be greater than the costs of the Kofid-19 pandemic as well as the global financial crisis in 2008.
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The report was developed in partnership with the American Administrative Consulting Company, “Oliver Waim”.
This is primarily due to the increasing number of countries that use global trade and financial systems to enhance their geopolitical sites primarily through a mixture of industrial policies, sanctions and other economic measures.

High penalties

Data issued by the London Stock Exchange Group indicate that the sanctions have increased by 370% since 2017.
This led to an increase in fragmentation around the world, and the global GDP may decrease by 0.6 trillion dollars, and in cases of severe fragmentation, it may reach 5.7 trillion dollars (5.47 trillion euros) or 5%, due to this.
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It is expected that the decrease in border capital flows and the decline in trade will be among the main reasons behind this possible loss in GDP, and the decrease in economic efficiency is likely to exacerbate this situation.

Increase inflation

Likewise, global inflation is expected to grow by more than 5% in high division.
However, the World Economic Forum report emphasizes the importance of implementing economic policies that focus on sustainable development, cooperation and flexibility at the global level.
Matthew Blake, head of the Center for Financial and Critical Systems of the World Economic Forum, said: “The potential costs of the global economy and in front of the leaders are a decisive opportunity to protect the global financial system by following an initial approach,” said Matthew Blake, head of the Center for Financial and Critical Systems of the World Economic Forum.
In the worst fragmentation cases, there may be a complete economic separation between the eastern blocs that may include Russia, China and more countries and Western bloc that may include the United States and its allies.

The intensity of the global crushing

Typical trade relations have set four possible positions for global fragmentation, which are: low, medium, high and high.
In the low scenario, the GDP of the Western bloc may witness a 0.6%decrease, while in the average fragmentation scenario this may worsen to a 1.8%decrease.
In the high scenario, the Western bloc may witness a decrease in its gross domestic product by 2.8%, while in the worst scenarios it may decrease by 3.9%.
As for the eastern bloc, in light of the state of low fragmentation, GDP may decrease by 1.4%, while in the average scenario it may decrease by 3.2%.
In the event that the state of severe fragmentation continues, the gross domestic product of the eastern mass may decrease by 4.6%.
However, in light of the severe fragmentation, it is expected that the gross domestic product of the eastern mass will record a fairly better performance with a decrease of 3.5%.

The expected influence on global trade

In the worst scenarios, countries that do not fall within any of the eastern and western blocs may be forced to trade only with the most important asset for them economically.
These countries include countries such as Brazil, Turkey and India, as well as other countries in Southeast Asia, Latin America and Africa.
It is possible that these countries will witness a decrease in the gross domestic product exceeding 10% in light of the severe fragmentation.
“The fragmentation does not only fuel inflation, but also negatively affects the prospects for economic growth, especially in emerging markets and developing economies that depend on an integrated financial system for its continued development,” said Matt Stratean, a private market analyst.