Geopolitical Conflict and 'Fragmentation': Impacts on Supply Chains and 'Slowbalisation

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As economists assess the financial impact of ongoing geopolitical conflicts, the International Monetary Fund (IMF) has highlighted the concept of "fragmentation" repeatedly in its World Economic Outlook, emphasizing concerns about how strife could disrupt global supply chains and potentially reduce global GDP by up to 7%. The IMF also notes that companies have become increasingly wary of fragmentation, particularly in the commodities sector, since the Russia-Ukraine conflict. However, while some realignment of supply chains is evident, it's not necessarily a shift toward reshoring; instead, it involves greater complexity and multi-layered supply chains, which can increase costs and create oversight challenges for companies and investors. This trend, referred to as "slowbalisation," has implications for inflation and economic growth.

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