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The new global economic normal

The Philippines in the coming months will join the rest of the world in full force as a global trading partner. With more and more Filipinos receiving the vaccine dose, the Philippines is expected to further reopen the economy and allow more workers to join in the recovery.

Like many other nations that have eased their COVID-19 restrictions, however, the Philippines will suffer the same supply chain disruptions, higher inflation and labor shortage now being experienced by advanced economies.

China, where COVID-19 originated, is feeling the pinch of the global economic reopening. Its factory gate inflation, or the cost of manufacturing, hit a 25-year high due to rising prices of commodities and surging global demand for other raw material inputs.

Germany is also reeling from pent-up demand brought about by the global virus lockdowns. Shortages in industrial components and raw materials are impeding its exports and hindering overall economic growth. The US, the world’s biggest economy and among the first to vaccinate a majority of its population, has seen American companies struggle with supply bottlenecks. Nike, one of the biggest sportswear companies, cannot produce enough to meet the demand because suppliers in Vietnamese and other Third World factories have either shut down or scaled back their operations as a result of lockdowns.

Compounding the disruption in the supply chain are surging oil prices. The price of oil in the world market has steadily risen and topped $80 a barrel. Increased transportation cost and electricity prices will weigh on ordinary consumers, many of whom lost their jobs or saw their salaries reduced.

The International Monetary Fund has noted that the broken supply chain is driving prices higher and slowing the momentum of economies recovering from the COVID-19 pandemic. The supply side, says the IMF, has not been able to come back as quickly despite a strong return in demand. Many workers are also reluctant to return to their jobs for fear of the Delta variant of COVID-19.

Philippine companies that are seeking to restore their full operations will have to grapple with supply shocks, higher cost of raw materials and rising oil prices. It’s the new normal in the global economy but a much better situation for those who lost their jobs in the pandemic.

Topics: COVID-19 , Global economy , Delta variant , International Monetary Fund
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