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IMF: The world economy has fallen back to the state of the Second World War

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Analysts from the International Monetary Fund said that at the moment all the conditions are in place for a “perfect storm” in the global economy, as a result of which geo-economic fragmentation and the collapse of the system may begin.

IMF: The world economy has fallen back to the state of the Second World War

As politicians and business leaders head to Davos, the global economy is facing what is arguably its biggest test since World War II, says published on Sunday corporate blog International Monetary Fund (IMF).

The war in Ukraine against the background of problems associated with the coronavirus pandemic has created a sharply increased risk of geo-economic fragmentation and the economic collapse of the established system, IMF analysts write.

High food and energy prices, tightening financial conditions and a re-evaluation of global supply chains amid persistent disruptions, plus skyrocketing financial market volatility and climate change are creating a “perfect storm” for the global economy, according to the blogger.

“Tensions over trade, technology standards and security have been mounting for years, undermining economic growth and confidence in the current global economic system,” analysts write, noting that since the start of Russia’s special military operation in Ukraine, about 30 countries have restricted trade in food, energy and other key commodities.

According to the IMF, to improve the state of the world economy, it is necessary to ease trade restrictions; solve the problem of debt payments, including through the restructuring of payments; modernize the system of cross-border transfers; solve the problem of climate change.

“The brutal fact is that we were all too slow to act when our economic fabric began to fray. But if countries can now find ways to come together to address these pressing issues that transcend national borders and affect us all, we can begin to reduce fragmentation and strengthen cooperation,” the IMF said.

The fund's analysts are confident that the consequences of the crisis will primarily affect the most indebted countries and companies that will have to rebuild their supply chains. However, according to the IMF, the negative consequences will still affect all categories of the population, including the richest.

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