The International Monetary Fund has cut the economic growth outlook for the United States and other major industrial powers amid ongoing supply chain problems and pricing constraints linked to the COVID-19 pandemic.
The IMF noted that the scene looks even more grim for low-income nations, amid uncertainty about the future course of COVID-19 and concerns over inflation.
“The outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics. The downgrade also reflects more difficult near-term prospects for the advanced economy group, in part due to supply disruptions,” it said in the outlook.
Prospects for global manufacturing have been throttled by shortages of necessities like semiconductors and other issues such as clogged ports and a lack of cargo containers, along with labor shortage throughout global supply chains.
The combination of these issues has made a return to pre-pandemic efficiency levels near impossible in much of the economy — and are expected to be highlighted in the U.S. during the upcoming holiday season.
Coupled with excess savings built up in wealthier nations, this perfect storm of disruption is driving up costs and risks spiking inflation.
While the IMF predicts inflation will return to pre-pandemic levels sometime in 2022, it warns that if supply disruptions persist, then so too could inflation.