The world’s financial officials, who met in Washington on Wednesday, October 13, 2021, discussed finding a way to relieve bottlenecks The supply chain that drives up prices, and threatens to derail the economic recovery, according to Agence France-Presse.
The meeting comes at a time when suppliers have been unable to keep up with rising demand, ships are lining up outside US ports waiting to unload goods, US consumer inflation remained high in September, and global oil prices rose more than 80% per barrel, the highest in years.
Global supply challenges are a major focus of the meetings of the International Monetary Fund, the Group of Twenty of advanced economies and the smaller gathering of finance ministers in the G7 countries.
Corona hinders economic recovery
The restrictions imposed to curb the spread of the Covid-19 epidemic have closed manufacturing and trade routes, while suppliers facing a shortage of workers and truck drivers have been unable to keep pace with the sudden rise in demand for goods, as economies begin to reopen after the Covid crisis.
The turmoil, which some politicians fear will be long-term, has also hampered the momentum of the recovery, prompting the International Monetary Fund to lower its estimates of the growth of major economies, such as the United States and Germany, while G7 officials agreed to work together to monitor the difficulties.
British Chancellor of the Exchequer Rishi Sunak, who chaired the meeting of the world’s richest nations, said that “supply chain issues are felt all over the world, and financial leaders around the world must cooperate to address our common challenges.”
The World Bank estimates the percentage of containers parked in or around ports at 8.5%, double what it was in January.
Italian Central Bank President Ignazio Visco, the International Monetary Fund and others agreed that inflation pressures were caused in large part by short-term factors, such as rising demand and supply issues.
But Visco acknowledged that it “may take months before it goes away” and told reporters that G20 central bankers were studying the issue to see if there were “structural factors” for inflation to rise more than expected, and “whether there were any elements (…) it can become permanent.”
Central bank governors are seeking to support the recovery with easy financial conditions, but at the same time while avoiding a permanent increase in inflation, while the G-20 said, in a statement, that central banks will “move as needed” to address price stability “while looking at inflation pressures where they are temporary”.
But World Bank President David Malpass cautioned that the rise in some prices “would not be temporary,” adding: “It will take time and the cooperation of policymakers around the world to sort them out.”
The head of the International Monetary Fund, Kristalina Georgieva, said that delays in vaccination rates to contain the epidemic in developing countries contribute to constraining supply, and “as long as it expands, the risk of disruptions in global supply chains will be higher.”
An American initiative to solve the crisis
In the world’s largest economy, US President Joe Biden announced, on Wednesday, an initiative to ease the backlog by pushing for the provision of continuous service throughout the day at ports and suppliers.
It has extracted a commitment to work longer hours from the two groups operating the giant Los Angeles port, the West Coast Port of Los Angeles, the International Longshore and Warehouse Union, and companies such as Walmart, FedEx and UPS.
But Biden argued that policies should be put in place to reduce dependence on single sources and boost domestic production to avoid supply shocks of this kind.
“Our country or our economy must never again be incapable of making the basic products we need, because we don’t have access to the materials we need,” the US president said, stressing, “We must never again have to rely too heavily on one company or one country.” This view was echoed by French Finance Minister Bruno Le Maire, who told reporters on the sidelines of the meetings that “the answer lies in one word: independence.”