Global Fragmentation Could Cause More Harm than COVID-19

Davos 2025: Economic recession and COVID-19 could be less damaging than global fragmentation, which could also impact India significantly.

According to the latest report released by the World Economic Forum on January 23, this fragmentation could lead to a loss of up to INR 49.25 lakh crore in global GDP. If this fragmentation reaches its peak, the most burdened countries could be emerging economies like India. This could be more dangerous than the economic recession and the losses caused by COVID-19.

The global fragmentation caused by geographical and economic divides could result in greater losses than the 2008 financial crisis and the 2020 COVID-19 pandemic. The report from the World Economic Forum shows that this fragmentation could lead to a loss of INR 49.25 lakh crore in global GDP.

Furthermore, the report warns that if global fragmentation intensifies, countries like India and other emerging economies may bear the heaviest burden. The Forum, in its 2025 Annual Meeting report, mentioned that countries are increasingly using global financial and trade systems through restrictions, industrial policies, and other economic measures to further geopolitical objectives.

Impact on the Global Economy Due to Fragmentation

The report, titled "Navigating Global Financial System Fragmentation," estimates that the result of these policies could lead to a loss of anywhere between INR 5.18 lakh crore and INR 49.25 lakh crore in the global economy, which could amount to 5% of global GDP.