"Asia would be the biggest loser if the global economy splits up, IMF warns"

" Asia would be the biggest loser if the global economy splits up, IMF warns \r\n \r\n\r\nAsia-Pacific has more to lose than any other region if the global trade system splits up in the wake of geopolitical tensions, the International Monetary Fund warned.\r\n\r\nAsia and Pacific countries could lose over 3% in gross domestic product if trade is cut off in sectors hit by recent U.S. chip sanctions on China and if non-tariff barriers in other areas are raised to \u201cCold War-era levels,\u201d\u00a0 the IMF said in research released on Friday .\r\n\r\nThat\u2019s twice the amount of projected global annual losses.\r\n\r\nSectors in Asian countries forced to contract because of reduced trade could suffer average employment losses of as high as 7%, the IMF added.\r\n\r\n \u201cWhen we talk about progression from rising trade uncertainty and more restrictive measures, [it] will eventually escalate into fragmentation where the world is divided,\u201d Krishna Srinivasan, director of the Asia and Pacific Department at the IMF, said at a press conference in Singapore on Friday.\r\n\r\n \r\n \r\n \r\n \r\n \r\n <img class=\"\" src=\"https:\/\/image.cnbcfm.com\/api\/v1\/image\/107142279-1666930377202-gettyimages-1208436658-AFP_1Q86RN.jpeg?v=1666941128&w=929&h=523\" alt=\"An exterior view of the building of the International Monetary Fund (IMF), with the IMG logo, is seen on March 27, 2020 in Washington, DC. - The coronavirus pandemic has driven the global economy into a downturn that will require massive funding to help developing nations, IMF chief Kristalina Georgieva said on March 27, 2020. (Photo by Olivier DOULIERY \/ AFP) (Photo by OLIVIER DOULIERY\/AFP via Getty Images)\" \/> \r\n \r\n \r\n \r\n Olivier Douliery | Afp | Getty Images \r\n \r\n \r\n \r\n \r\n\r\n\u201cAsia risks losing a lot because it is a key player in global supply chains and in a fragmented world, it risks losing more than anybody else.\u201d\r\n\r\n \r\n U.S.-China trade tensions \r\n\r\n \r\n\r\nSigns of global fragmentation emerged during the trade war between the U.S. and China in 2018. But more worrying signs, such as the Russia-Ukraine war, have since emerged. Sanctions on Russia have added even more uncertainty around trade relations, the IMF said.\r\n\r\nPolicy uncertainty around trade, not just the restrictions themselves, could hamper economic activity as firms pause hiring and investments and new firms postpone entries into markets, the IMF said.\r\n\r\nFor example, the IMF found that\u00a0 2018 U.S.-China trade tensions \u00a0reduced investments by about 3.5% after two years.\r\n\r\nThe impact of trade fragmentation is greater for emerging markets in Asia and for firms with high debt.\r\n\r\nThe IMF said while its research focused on the impact of fragmentation on trade, there could be other deeper downsides, such as the \u201cunraveling of financial ties.\u201d\r\n\r\n \u201cFinancial fragmentation may lead to short-term costs from a rapid unwinding of financial positions, and long-term costs from lower diversification and slower productivity growth because of reduced foreign direct investment,\u201d the IMF said.\r\n \r\n\r\nThe international body is urging countries to roll back damaging trade restrictions and reduce uncertainty through clearer communication of policy objectives.\r\n\r\n \u201cGreater emphasis can be placed on digitalization, investing in education \u2026 but most importantly, international cooperation, because we want to avoid the risk of fragmentation \u2026 it\u2019s important that we all act now, act together,\u201d Srinivasan said.\r\n\r\n \r\n Capital flows \r\n\r\n \r\n\r\nThere have been concerns over capital flows out of Asia as interest rates in the region lag behind those of the United States. But so far, they are still \u201cmanageable,\u201d Srinivasan said.\r\n\r\nThe situation in Asia has been mixed, Srinivasan added.\r\n\r\n \u201cFor example, we saw a lot of capital flow for India, we saw capital flows for Taiwan, China, and moderate flows from Indonesia, moderate flows for Malaysia, but we saw some net inflows into Thailand. And more recently, we see flows back into India. So the picture is a bit mixed,\u201d he said.\r\n\r\n \r\n "

"Asia would be the biggest loser if the global economy splits up, IMF warns"

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