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2022/05/05 / Erste Group Research

Lingering supply-side constraints dent trade

The “perfect storm” from COVID, war, inflation, ...

The pandemic has created bottlenecks along global supply chains that are yet to fully dissipate. After the initial shock of COVID-19 lockdowns, restrictions eased and global demand for raw materials and intermediate goods (including semiconductors) soared. Moreover, producers have had to battle with the shortage of freight containers and the resulting higher cost of goods transport.

A significant part of consumption, especially from the US and Europe, shifted from services to goods – durable goods in particular. While demand rose quickly, it will take longer for the supply side to catch up. Global supply chain problems eased briefly in late 2021 and early 2022, but the Russian invasion of Ukraine has once again brought them into the spotlight.

Exports of goods, especially manufactured ones, play a key role in many countries and we should not forget their relatively high import dependency. Thus, CEE countries are generally quite exposed to global supply chains. Country-by-country regressions on the CEE8 region suggest Global Supply Chain Pressure Index (New York Fed’s proxy for constraints on global supply chains) has a statistically significant, negative impact on real goods exports in Czechia, Romania and Slovakia. The rest of the region seems to be surprisingly more resilient in this respect.

Supply chain issues are likely to stay with us for a while. Although pandemic-related concerns have mostly faded into the background in Europe and the US, China continues to battle with widespread local flare-ups. Together with risks stemming from the war in Ukraine, trade faces potentially tough quarters ahead.
This is likely to be further exacerbated by elevated producer and consumer price pressures, that are in turn further fueled also by supply-chain issues and pose noteworthy headwinds to the global recovery this year. However, once the situation improves, trade could see an uptick.

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General information

AuthorErste Group Research
Product nameCEE Economies Special Report
Topic in focusMacro/ Fixed income
Economy in focusCEE
Currency in focus-
Sector in focus-


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