A report commissioned by Dubai-based trade enabler DP World has found that supply shortages will increase global inflationary pressure in 2022.
Sultan Ahmed bin Sulayem, group chairman and CEO of DP World, said he doesn’t see supply chain bottlenecks clearing until 2023.
The study found that while trade is expected to expand further this year, production levels have been unable to keep pace with demand leading to supply shortages which will hamper import growth in 2022.
The report added that 29 percent of 3,000 export companies that responded are concerned about the risk of rising inflation due to supply chain disruption.
Another 30 percent of companies said they expect increasing transport costs to limit export-led growth in 2022, contributing to higher inflation.
Bin Sulayem said: “The report is evidence that rising freight rates, and low production levels, coupled with a volatile social-economic situation in Europe, will keep inflation high in 2022 as companies navigate a risky trading environment.
“But supply chains are adapting, and executives are positive about the future of trade, which will prove durable in the near to medium-term despite any inflationary fears.”
The survey of 3,000 respondents, produced in partnership with Economist Impact captured perspectives of company leaders across the world.
In addition to rising inflation, geopolitical tensions between the US and China continue to concern executives with 30 percent claiming that an ongoing trade war between the US and China is the top reason to be pessimistic about global trade.
Despite the apprehension, and low production levels limiting imports, international revenue expanded for 68 percent of companies exporting freight in 2021, compared to 42 percent in 2020.
The report said 35 percent attributed that growth to an expansion of exports into new markets, as companies took advantage of new trade routes created by the pandemic.
To cope with the pandemic and ease inflationary pressures, companies are also changing their strategic outlook with 48 percent now saying that diversifying their supplier base is their primary reconfiguration strategy, with efforts focused on sourcing raw materials (24 percent) and managing shipping lines and logistics (21 percent).
The most common cited reason for optimism for global trade was the growth of technology to ease supply chain issues, particularly the adoption of 5G to increase connectivity.
Digitalisation can also streamline operations and increase efficiencies in trade, the report said, with 67 percent of companies in the industrial sector already using digital platforms for supply chain management.
This is the second edition of the Trade in Transition report commissioned by DP World, that retrieves data from over 3,000 executives, examining their experience of the pandemic, confidence on government policies, supply chain pressures on the movement of trade around the world and ESG priorities in trade.
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