COVID-19 significantly affected global supply chains, but according to new International Monetary Fund (IMF) research, more diversification of source countries and inputs can significantly reduce the economic impact from supply disruptions. In an analytical chapter of its forthcoming World Economic Outlook (WEO), IMF researchers said that countries experienced larger declines of goods imports, and GDP, in the first half of 2020 when trading partners imposed strict COVID-19 lockdowns. Such declines revealed the vulnerabilities of value chains optimised for maximum efficiency and have prompted governments to call for more production to be brought home. “Dismantling global value chains is not the answer. More diversification, not less, improves resilience,” the researchers wrote in a blog post accompanying the chapter.
