IMF warns supply snarls slowing global recovery


WASHINGTON: Supply chain disruptions around the world are driving price increases and sapping momentum for economies rebounding from the Covid-19 pandemic, the IMF warned on Tuesday.
The continuing impact of the pandemic and the lack of vaccine distribution around the world is worsening the economic gap and darkening prospects for developing nations, the IMF said in its latest World Economic Outlook.
The world economy is expected to grow 5.9 percent this year, only slightly below what was projected in July, before slowing to 4.9 percent in 2022, according to the report.
But the overall figures mask big downgrades and ongoing struggles for some countries, including the United States, Germany and Japan, which are feeling the impact of supply bottlenecks, IMF chief economist. Gita Gopinath said.
“This recovery is truly unique,” he told AFP on the sidelines of the annual meetings of the International Monetary Fund and world Bank.
Despite a strong return in demand, “the supply side has not been able to come back as quickly,” hampered in part by the spread of the Delta variant of Covid-19, which has made workers reluctant to return. to their jobs.
That labor shortage is “fueling price pressures” in major economies, he said, slowing growth expectations this year.
Energy prices have hit multi-year highs in recent days, with oil above $ 80 a barrel, weighing on households.
But Gopinath said he expects energy prices to start to decline by the end of the first quarter of 2022.
In low-income developing countries, the outlook “has darkened considerably due to the worsening dynamics of the pandemic,” he said in a blog post about the new forecasts.
The setbacks, which he attributed to the “great vaccine gap”, will affect the restoration of living standards, and a prolonged pandemic recession “could reduce global GDP by a cumulative $ 5.3 trillion over the next five years. “, he warned.
“The dangerous divergence in economic prospects between countries remains a major concern,” Gopinath said.
Advanced economies are expected to regain “the trajectory of the pre-pandemic trend in 2022 and exceed it by 0.9 percent in 2024,” it said.
However, in emerging market and developing economies excluding China, production is expected to “remain 5.5 percent below the pre-pandemic forecast in 2024.”
Amid the danger of long-term scars, “the top political priority is therefore to vaccinate at least 40 percent of the population in all countries by the end of 2021 and 70 percent by mid-2022” , said.
The world’s largest economy has benefited from massive fiscal stimulus, but the delta wave and supply problems have undermined progress, prompting the IMF to cut America’s growth forecast for this year to six percent. cent, a full percentage point below the July figure.
US growth is expected to slow to 5.2 percent next year, slightly faster than previously expected, but authorities will face a delicate balancing act amid risks of rising inflation and employment lag, noted the fund.
Wages also threaten to rise as employers compete for scarce workers, Gopinath noted.
While inflation is expected to return to “more normal levels” by mid-2022 in most countries, it could take longer in the United States, he told reporters.
“There is tremendous uncertainty, we have never seen a recovery of this kind,” he said, noting that labor shortages plague employers even amid high unemployment and supply unable to keep up with demand.
U.S. consumer prices rose 5.3 percent annually in August, more than double the Federal Reserveis the goal of two percent. On Wednesday, markets will be on the lookout for the government’s inflation report for September.
United States Secretary of the Treasury Janet yellen He said he believes the price increases will be “temporary.”
“But I don’t want to suggest that these pressures will go away in the next month or two,” he told CBS News. “This is an unprecedented shock to the world economy.”
However, if higher inflation takes hold, it could force central banks to respond aggressively, and rising interest rates would slow down the recovery, the IMF warned.

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