Abstract
Geopolitics is Reshaping global economic ties, Gita Gopinath, IMF first deputy managing director, said at Stanford University. Countries are reevaluating their trading partners based on economic and national security concerns. New trade restrictions have more than tripled since 2019, while geopolitical risks have spiked.
Geopolitics Is Reshaping Global Economy
Geopolitics is Reshaping global economic ties, Gita Gopinath, IMF first deputy managing director, said at Stanford University. Countries are reevaluating their trading partners based on economic and national security concerns. New trade restrictions have more than tripled since 2019, while geopolitical risks have spiked.
Foreign direct investment flows are also being redirected. After Russia’s invasion of Ukraine, trade and FDI flows between geopolitical blocs declined by roughly 12 and 20 percent more on average than flows within blocs, respectively.
Some countries are reevaluating their heavy reliance on the dollar in their international transactions and reserve holdings. For China-leaning countries, the dollar’s share of trade finance payments has declined since early 2022, while the renminbi’s share has more than doubled.
Policymakers are increasingly—and justifiably—focused on building economic resilience. But if the trend continues, the costs could significantly outweigh the benefits, Gopinath said.
“What we’ve seen in the last few years is like nothing we’ve seen since the end of the Cold War.”
—IMF First Deputy Managing Director Gita Gopinath at the Stanford Institute for Economic Policy Research in May 2024.
Overheard
“We lived in a world where economics dominated politics. Now politics is determining economics.”
—Gordon Brown, former UK prime minister, speaking at an IMF–Peterson Institute for International Economics conference in April 2024.
“The recent rise in global interest rates has revealed a flawed IMF lending framework for middle-income countries that no longer supports debt sustainability. It is in desperate need of reform.”
—Mia Mottley, prime minister of Barbados (see “The IMF Must Lead on Debt Sustainability,” this issue of F&D).
By the numbers
According to the IEA’s net zero emissions scenario, global demand for energy transition minerals will rise significantly in the coming decades.
Citation: Finance & Development 61, 002; 10.5089/9798400276620.022.A002
SOURCES: International Energy Agency (IEA), World Energy Outlook 2023; and IMF staff calculations.NOTE: PGMs = platinum group metals; REEs = rare earth elements.
