The Economist Impact has published a report on the cost of global financial fragmentation, sponsored by Swift. Based on the current trajectory of sanctions and trade barriers, the resulting financial fragmentation is expected to globally cost $2.8 trillion or 2.6% of GDP. If the negative trend escalates (doubles), the cost could be $6.5 trillion. However, it’s also possible that steps could be taken to mitigate the fragmentation, which could reduce the impact to $1.3 trillion.
For example, that might involve a drive towards more common global standards that lower transaction costs or greater interoperability between fragmented financial systems. The report identifies decentralized finance as offering some potential to provide alternative avenues to create new opportunities.
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