Supply chain chaos drags down global growth

Supply chain chaos drags down global growth

Thanks to the implementation of the Covid-19 vaccine, the global economy is starting to come out of the pandemic, but the disruption of supply chains is a headache for countries.

Thousands of containers are stuck at the Port of Los Angeles, the trade gateway of the West Coast of the United States. Photo: AFP

Dangerous consequences

The Covid-19 pandemic has caused dangerous economic consequences, which is the disruption of supply chains.

The rapid spread of Covid-19 in 2020 has caused industries around the world to close and industrial output fell sharply. Most workers are in a state of stagnation or faltering work and low consumption demand.

But as the anti-epidemic blockade orders are gradually lifted and consumer demand begins to recover, supply chains are still struggling to overcome disruptions. This pushed commodity manufacturers and distributors Falling into chaos, they can’t produce or supply as many goods as they did before the pandemic for a variety of reasons, the main one being a lack of labor, critical components, and even raw materials.

The world’s “leading” economies are facing increasingly serious supply chain problems due to different reasons. For example, China is experiencing an energy crisis due to power shortages in many localities, causing industrial production to be severely affected in recent months.

In the UK, Brexit is the main cause of the shortage of truck drivers. The US and Germany are also facing the same problem. Particularly, the US is facing a situation of goods being piled up at seaports.

The situation “will get worse”

Analysts like Tim Uy from Moody’s Analytics say supply chain problems “will get worse before things get better”. The global economy continues to recover, but the recovery momentum will be hampered by supply chain disruptions from all angles, Mr. Tim Uy said.

“Border controls and travel restrictions during the pandemic, the lack of readiness to issue a global vaccine passport, plus pent-up domestic demand have combined to form a complete storm and production World production will be stuck because distribution and delivery will not keep up with demand, costs and prices will increase, and as a result, global GDP growth will not be strong,” Mr. Tim Uy argued.

At their most efficient, global supply chains help reduce the cost burden for businesses, often by reducing labor and operating costs associated with manufacturers, and fostering innovation and competition in business.

But the Covid-19 pandemic has revealed weaknesses in connecting links as well as instability in supply chains around the world. Supply chain bottlenecks and production bottlenecks have affected a wide range of sectors, services and goods, from shortages of electronics and cars due to lack of semiconductor chips, to difficulties in manufacturing. the supply of meat, medicine, and household goods.

In the context of high consumer demand, freight rates from China to the US and Europe have skyrocketed. Not only that, the shortage of truck drivers in both these areas exacerbates the problem of transporting goods to consumers. The consequence is that the price of goods on the shelves becomes more expensive.

As economies bounce back, the supply chain crisis looms and becomes one of the biggest challenges facing governments. People are eager to spend again but soon get bored because goods are empty and expensive.

Americans are likely to face higher commodity prices and sparser store shelves over the Christmas and New Year holidays in 2022, while the Joe Biden administration remains steep, White House officials said. efforts to solve the congestion of goods at seaports.

Both China and Europe are experiencing growth problems due to supply chains. According to official data released at the beginning of the week, China’s economy in the third quarter of 2021 grew by 4.9% over the same period last year, due to industrial production. in September growth only 3.1%, lower than the expectation of 4.5%.

Commenting on China’s third-quarter growth, Ms. Iris Pang, chief economist at ING Banking and Finance Group (Netherlands), said: “Manufacturing activities were heavily affected by the fault. supply chain due to Covid-19 while operations of some seaports were also affected in the third quarter of 2021 and chip shortages continued this quarter.”

“Supply chain disruptions are expected to persist as freight rates remain high and chip shortages remain a pressing issue for many sectors such as equipment manufacturing, automotive, and electronics. telecommunications,” predicted Ms. Iris Pang.

Last week, Germany’s top economists warned that “supply bottlenecks will continue to weigh on production in the near-term” and are likely to hamper growth in Europe’s largest economy.