Analysis by staff at the International Monetary Fund (IMF) suggests that supply chain disruptions reduced global GDP growth by 0.5 to 1.0 percentage points in 2021.
At the same time, these interruptions added 1.0 percentage points to core inflation.
First of all, the shift towards consumption of goods, particularly in advanced economies, has overloaded global supply chain networks during the pandemic.
This problem was compounded by pandemic-related impediments to transportation and staffing, as well as the inherently fragile nature of just-in-time logistics and tight inventories.
The resulting disruption to world trade caused shortages and increased prices of imported consumer goods.
Specifically, according to the IMF, the disruptions in the United States have been particularly severe, in line with the greater shift towards the consumption of goods.
While international shipping fleets have limited spare capacity, bottlenecks are often on land, as trucks and other services can’t get cargo out of docks faster than new ships can bring it in.
For the IMF, demand is likely to return to services (households can only buy a certain amount of durable goods).
Supply chain
The benchmark assumes that supply-demand imbalances will decrease over the course of 2022.
But the longer they persist, the IMF warns, the more likely they are to be fed by expectations of higher future prices, and the greater the risk to the global economy.
Dysfunctional global supply chains also make economies less able to adapt to a possible resurgence of the pandemic, as clogged ports impede the flow of goods needed to adapt to changing public health conditions.
The impact of the Omicron variant may further limit port efficiency, increase shipping problems and delay the rebalancing of consumer demand from goods to services, exacerbating imbalances between supply and demand.
Finally, the IMF expects world trade to moderate in 2022 and 2023, in line with the general pace of expansion.
Assuming the pandemic subsides during 2022, the IMF expects supply chain issues to subside later in the year.
The accompanying moderation in global demand for goods will also help reduce imbalances. Cross-border trade in services, particularly tourism, is expected to remain subdued.
