Data Driven Futures

New IMF chief warns of ‘digital Berlin Wall’

Written by Hannah McGrath

A future slowdown in global economic growth and the breakdown in trade co-operation could lead to the creation of a “digital Berlin Wall”, according to Kristalina Georgieva, the new managing director of the International Monetary Fund (IMF).

Setting out the agenda for her term as IMF chief, the Belgian economist spoke of the need for countries to continue ‘moving in synch’ to avoid a deceleration in global GDP growth.

Georgieva, who replaces Christine Lagarde at the head of the IMF this week, said that the softening of economic growth - especially in advanced economies including the US and Japan - had led the economic policy body to revise downward for growth estimates for 2019 and 2020.

Fractures in global trade, notably the ratcheting up of the trade war between the US and China, has led to a “near standstill” in global trade growth, which could also be compounded by rapid technological change and the race to digitise systems, Georgieva stated.

“Even if growth picks-up in 2020, the current rifts could lead to changes that last a generation – broken supply chains, siloed trade sectors, a ‘digital Berlin Wall’ that forces countries to choose between technology systems,” she explained. “Our goal should be to fix these fractures, our world is intertwined, so our responses must be coordinated.”

Sustained trade conflicts could cost the global economy around $700 billion by 2020, or about 0.8 percent of GDP, according to the IMF’s forecasts.

Georgieva underlined the need for countries to identify new sources of growth in a “rapidly changing world” where digitisation and automation of jobs is set to transform the global economy and working conditions for millions.

“Potential job losses from automation and shifting demographics require countries to reform the structure of their economies,” she said, adding: “If we do not act, many countries will be stuck in mediocre growth.”