Global Geo-Economic Fragmentation: A Threat to Future Prosperity

A World Economic Forum report highlights that geo-economic fragmentation could reduce global GDP by up to $5.7 trillion, posing a larger threat than the 2008 financial crisis or the COVID-19 pandemic. Emerging economies, like India, could suffer the most, facing increased inflation and significant GDP declines.

A new report from the World Economic Forum underscores the potential economic peril posed by growing geo-economic fragmentation. The study warns that such divisions could trim global GDP by as much as $5.7 trillion, hitting emerging markets particularly hard, and exerting a greater impact than past crises like the 2008 financial crash or the COVID-19 pandemic.

The report, developed with Oliver Wyman, was unveiled during the Forum's Annual Meeting 2025. It found that the use of financial and trading systems for geopolitical aims, seen in a sharp rise of sanctions and strategic policies, is contributing to economic fragmentation. This fragmentation may lead not only to decreased trade and cross-border capital flows but also heightened global inflation, potentially exceeding five percent in severe scenarios.

WEF advocates a strategic approach where policymakers can push forward with economic statecraft that prioritizes cooperation and sustainable growth. The impact of these policies is crucial, as missteps might substantially slow GDP growth and inflate living costs, affecting numerous countries, primarily emerging markets in Latin America, Africa, and Asia.

(With inputs from agencies.)