To achieve a robust recovery in the global economy, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), has urged the avoidance of protectionism.
“One of the most urgent steps toward a robust recovery involves avoiding the temptation of a new form of protectionism,” she told in her speech titled ‘United against a Fragmented World’ held at Brussels Economic Forum in Belgium.
Protectionism, which includes government policies that restrict international trade to help domestic economies, has become in recent years a controversial topic amid countries’ bilateral trade relations.
The term has since been hand-in-hand with the souring trade ties between the US and China, the world’s two biggest economies, after former US President Donald Trump had begun in early 2018 imposing tariffs on many goods imported from other countries, and blaming Beijing for unfair trade practices.
Georgieva stressed in her speech that reviving multilateral cooperation is essential for long-term growth around the world, especially in the post-pandemic period causing supply chain disruptions and Russia’s war on Ukraine adding concerns to countries’ investment decisions.
“Taken together, these trends are creating a more fragmented world with real economic costs,” said Georgieva, adding that trade fragmentation could cost up to 7% of global GDP in the long term, according to a research by the IMF.
“If technological decoupling is added, some countries could see up to 12 percent of GDP losses,” she noted.
The IMF chief, in addition, said their monetary tightening, in order to lower stubborn inflation, is also weighing on global economic growth and causing some financial vulnerabilities.
Georgieva called for structural reforms and investment in people, technology and innovation in order to improve education, strengthen labor markets, modernize social safety nets, and step up climate action to ensure sustainable recovery.