IMF recommends diversification for companies
Given possible future trade impacts, the IMF spoke about the possibility of working in diversification of origins for imports
The International Monetary Fund (IMF) recommended companies and countries to increase the diversification of the origin of their imports and that these are more substitutable among themselves as a recipe to cushion future global trade impacts, according to one of the analytical chapters of its report. “Global Economic Outlook“.
In this sense, the IMF considers the policies that, in response to the pandemic, have decided to generate local and national value chains to be erroneous.
“The resilience of the supply chain against “shocks” is better built by increasing diversification away from the domestic origin of inputs and greater substitution of these inputs,” the IMF technicians said in the document.
The definition of diversification used by the IMF has a number of nuances compared to the usual one. When the organization refers to more diversification, it points to the countries of origin, not to the products; to intermediate, not final, goods and services; and to the use of intermediate inputs, not to their production or export.
The organization also managed to quantify the impact of these measures on the Gross Domestic Product (GDP) of the countries. For example, in the event that a country that is a supplier of intermediate inputs registers a fall in the labor force of 25 %, a typical economy would see an eight-tenths decrease in its GDP compared to the estimates. In a scenario where there is great diversification, this drop is almost halved: 0.4 %.
Source: dpa
