The Banking Executive Magazine - May 2024 Issue

The Global Economy economic fragmentation. Historically, the concept of an inter- dependent global economy within a system of nearly 200 sovereign states has been both ambitious and chal- lenging. This balance was disrupted in the 1930s but was meticulously rebuilt after World War II on the foundations of agreed-upon rules, shared institutions, mutual under- standing, and crisis management. For decades, economic policies were carefully separated from security concerns, a distinction that became crucial as diverse regimes integrated into the global economy in the 1990s. However, today, these foundations are showing signs of strain. The mo- mentum of economic integration ap- pears to be slowing, with significant implications. Gita Gopinath, the IMF's first deputy managing director, has pointed out that economic frag- mentation could reduce the effi- ciency gains from trade, increase macro-financial volatility, diminish capital flows to the Global South, and undermine global public goods such as climate action. Several factors contribute to this trend. Rising geopolitical tensions have decreased trust and reduced the ISSUE 185 MAY 2024 the BANKING EXECUTIVE 19