Global finance officials meeting in Washington on Wednesday focused on finding a way to alleviate supply chain bottlenecks that are driving up prices and threatening to derail the economic recovery.
As demand increased, suppliers were unable to keep up. Ships are lined up outside US ports waiting to unload cargo, US consumer inflation remained high in September, global oil prices jumped to over $ 80 a barrel, the highest in years, and British families might have to go without turkeys for Christmas dinner.
Global supply challenges are at the heart of meetings of the International Monetary Fund, the Group of 20 advanced economies, and the smallest gathering of Group of Seven finance ministers.
Pandemic restrictions have closed manufacturing and trade routes while suppliers, who face shortages of workers and truck drivers, have been unable to cope with the sudden surge in demand for goods as as the economies began to reopen.
The disruptions, which some policymakers fear will last, have hampered the momentum of the recovery, prompting the IMF to cut growth forecasts for large economies like the United States and Germany.
G7 officials have agreed to work together to monitor the difficulties.
âSupply chain problems are felt around the world – and financial leaders around the world must work together to tackle our common challenges,â said Chancellor of the Exchequer Rishi Sunak, who chaired the meeting of richest nations in the world.
The World Bank estimates that 8.5% of global container transport is blocked in or around ports, twice as many as in January.
Threat of inflation
Italy’s central bank chief Ignazio Visco agrees with the IMF and others who have said inflationary pressures are mainly due to short-term factors such as rising demand and problems with offer.
But he acknowledged that “these can take months to fade.”
G20 central bankers are studying the issue to see if there are “more structural factors at work” in the larger than expected spike in inflation, and “if there is a component … that could become permanent “Visco told reporters.
Central bankers distinguish between supporting the recovery with easy financial conditions while avoiding a permanent rise in inflation.
The G20 statement said central banks “will act as necessary” to ensure price stability “while addressing inflationary pressures where they are transient”.
But World Bank President David Malpass has warned that some of the price spikes “will not be transitory.”
“It will take time and the cooperation of policymakers around the world to resolve them.”
IMF chief Kristalina Georgieva said lagging immunization rates to contain the pandemic in developing countries is contributing to supply constraints, and “as long as it grows, this risk of disrupting chains global supply will be higher “.
In the world’s largest economy, US President Joe Biden on Wednesday announced an initiative to reduce the backlog by pushing for 24-hour service at ports and suppliers.
He won commitments to work extended hours from executives at the giant West Coast Port of Los Angeles and the International Longshore and Warehouse Union, as well as companies such as Walmart, FedEx and UPS.
But Biden said policies must be made to reduce reliance on single sources and boost domestic production to avoid such supply shocks.
âNever again should our country and our economy be unable to manufacture the essential products we need because we don’t have access to the materials we need,â Biden said. “We will never have to depend too much on a company or a country again.”
This theme was echoed by French Finance Minister Bruno Le Maire, who told reporters on the sidelines of the meetings: âThe answer is in one word: independence.