The global economy could be broken into "permanent fragmentation" as a result of Russia's invasion of Ukraine, the IMF has warned as it revised down its forecasts for economic growth this year.
In its twice-yearly World Economic Outlook, the Washington-based organisation cut its estimate for worldwide economic growth in 2022 to 3.6% from 4.4% before.
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An immediate embargo on Russian oil and gas would raise inflation further, deal big blows to European and emerging economies and require even higher interest rate hikes from central banks.
Based on current conditions, the UK's economic growth estimate was cut to 3.7% from 4.7%, but with growth next year predicted at just 1.2% as consumer spending and business investment are crushed by the cost of living crisis and tighter financial conditions.
The US is forecast to grow 3.7% this year, down from 4%, while Germany and Italy are seen growing 2.1% and 2.3%, down from 3.8% and 3.8% respectively.
Pierre-Olivier Gourinchas, the IMF’s new chief economist, said the war in Ukraine had increased the risk of “a more permanent fragmentation of the world economy into geopolitical blocs with distinct technology standards, cross-border payment systems, and reserve currencies.
“Such a tectonic shift would entail high adjustment costs and long-run efficiency losses as supply chains and production networks are reconfigured. It also represents a major challenge to the rules-based framework that has governed international and economic relations for the last 70 years.”