IMF Working Papers

This paper investigates the impact of geoeconomic fragmentation on trade flows in the Caucasus and Central Asia (CCA) and Middle East and North Africa (MENA) regions. Amidst ongoing conflicts, security threats, the spike in global economic uncertainty, and evolving consumer sentiments, these regions face intricate challenges that necessitate agile policy responses. The analysis presents three illustrative scenarios, examining the effects of targeted trade restrictions, trade diversion, and neutral stances on exports and economic output. The findings of these illustrative scenarios highlight the critical importance of reducing trade barriers, enhancing infrastructure, and improving regulatory environments to navigate the risks and opportunities posed by geoeconomic fragmentation. These measures are essential for fostering resilience and promoting sustainable growth in the affected regions.