Supply constraints slowing global recovery

14 October 2021 | Economics

Heather SCOTT

Worldwide supply chain disruptions are driving price increases and draining momentum out of economies recovering from the Covid-19 pandemic, the IMF warned on Tuesday.

The ongoing hit from the pandemic and the failure to distribute vaccines worldwide is worsening the economic divide and darkening prospects for developing nations, the IMF said in its latest World Economic Outlook.

The global economy is expected to grow 5.9 percent this year, only slightly lower than projected in July, before slowing to 4.9 percent in 2022, the report said.

But the overall figures mask large downgrades and ongoing struggles for some countries, including the United States, Germany and Japan that are feeling the impact of supply bottlenecks, IMF chief economist Gita Gopinath said.

"This recovery is really quite unique," she told AFP on the side-lines 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.

Those labor shortages are "feeding into price pressures" in major economies, she said, slowing growth expectations this year.

Energy prices have hit multi-year highs in recent days, with oil above US$80 a barrel, weighing on households. But Gopinath said she expects energy prices to begin to retreat by the end of the first quarter of 2022.

In low-income developing countries, the outlook "has darkened considerably due to worsening pandemic dynamics," she said in a blog post on the new forecasts.- Nampa/AFP

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