Global finance officials gathered in Washington on Wednesday were focused on finding a way to alleviate supply chain bottlenecks that are driving prices higher and threatening to derail the economic recovery.
As demand has spiked, suppliers have not been able to keep up: Ships are lined up outside American ports waiting to offload goods, US consumer inflation remained elevated in September, global oil prices have jumped over $80 a barrel, the highest in years, and British families may do without turkeys for Christmas dinner.
The supply challenges on a global scale will be a focus of meetings of the International Monetary Fund, the Group of 20 advanced economies and the smaller gathering of finance ministers from the Group of Seven.
Pandemic restrictions shuttered manufacturing and trade routes while suppliers, who are facing shortages of workers and truck drivers, have not been able to keep up with the sudden surge in demand for goods as economies begin to reopen.
The disruptions have hobbled the recovery momentum, prompting the IMF to cut growth forecasts for major economies like the United States and Germany.
"The bottlenecks on raw materials, semiconductors and hiring difficulties on the labor market" will weigh on the growth dynamic "in the months and years to come," French Finance Minister Bruno Le Maire told reporters on the sidelines of the meetings.
"The answer lies in one word: independence," he added, referring to the current reliance on suppliers in Asia.
The World Bank estimates 8.5 percent of global container shipping is stalled in or around ports, twice as much as in January.
The bottlenecks are driving sharp increases in shipping fees and the final cost of goods, and World Bank President David Malpass warned that some of the price spikes "will not be transitory."
"It will take time and cooperation of policymakers across the world to sort them out."
IMF chief Kristalina Georgieva said the lag in vaccination rates to contain the pandemic in developing nations is contributing to the supply constraints, and "as long as it widens this risk of interruptions in global supply chains is going to be higher."
While the IMF projects inflation in advanced economies will retreat by the middle of next year, "this mismatch between demand growing and supply falling behind of course creates pressure on prices," she told reporters.
UK Chancellor of the Exchequer Rishi Sunak said the situation requires global cooperation.
"From global tax reform to global supply chains, we must work together to seek international solutions for the benefit of our citizens at home," he said before leaving for the meetings in Washington.
In the world's largest economy, US President Joe Biden plans to announce the commitments for 24-hour port service at a meeting Wednesday with the leaders of the giant West Coast port of Los Angeles and the International Longshore and Warehouse Union.
The White House has also won commitments from companies including Walmart, FedEx and UPS to work extended hours and move towards schedules of 24 hours a day in some operations, officials said.
U.S. Treasury Secretary Janet Yellen on Tuesday urged Americans not to panic, saying there are plenty of goods available and price surges should be "transitory."
But she acknowledged the prices pressures won't "disappear in the next month or two. This is an unprecedented shock to the global economy."
Le Maire, who said rising energy prices will be a key topic of discussions this week, touted the French government's response, which included freezing rates and providing vouchers for consumers.
However, the IMF said any measures should be targeted.
Generalized energy subsidies "benefit rich households who don't need the support," making them very costly, Paulo Medas of the IMF's Fiscal Affairs Department said told reporters.
In addition, "they are not friendly to the environment. In fact they lead to very negative incentives."© 2021 AFP