Indonesia gathered the leaders of the world’s 20 largest economies commonly referred to as G20 in its
island paradise of Bali for a two-day summit from November 15 to 16 to discuss how they could cooperate on building a more stable future. But while this year’s summit has a post-pandemic theme of “Recover Together, Recover Stronger,” geopolitical divisions are taking centre stage.
Unfortunately, this year’s G20 meetings attracted more international attention than in previous years. The summit took place against the backdrop of global political and economic crises: a challenging post-pandemic recovery, the ongoing Russian invasion of Ukraine, soaring food and energy prices, and the worsening climate crisis. It was expected that the gathering would provide an opportunity for the world’s biggest powers to address those pressing global challenges.
The summit was preceded by a bilateral meeting between United States President Joe Biden and Chinese leader Xi Jinping, the first time the two had met since Biden became president. Although there were few tangible results, it was overall a positive meeting after relations between the superpowers plunged to near-historic lows earlier in the year. Conversely, Putin’s in-person absence spared the summit a major distraction and helped it focus on economic matters.
The G20 is a multilateral forum representing the world’s largest economies. It involves 19 countries – Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, and the United States including the European Union. The forum represents more than 60% of the earth’s population, 75% of global trade, and 80% of the world’s gross domestic product (GDP).
This summit was organised as the world edges toward a global recession. Countries’ central banks have been hiking interest rates to curb inflation, but prices struggle to return to pre-pandemic levels. The World Bank reports that these hikes, coupled with financial market stress, could lead to global GDP growth slowing down to 0.5% next year, which would destabilise major economies and significantly slow poverty alleviation in developing countries.
During last week’s meeting, the world economic leaders adopted a declaration deploring Russia’s aggression in Ukraine “in the strongest terms” and demanding its unconditional withdrawal. They also recognised that while most members condemned the war in Ukraine, “there were other views and different assessments of the situation and sanctions”.
On the global economy, the G20 nations agreed in their declaration to pace interest rate rises carefully to avoid spillovers and warned of “increased volatility” in currency moves, a sea change from last year’s focus on mending the scars of the COVID-19 pandemic. The reference to spillovers was a nod to emerging economies’ concerns about the potential for huge capital outflows if aggressive U.S. rate increases continue.
Also, the leaders pledged to take coordinated action to address food security challenges and applauded the Black Sea grains initiative. But the body has come under intense criticism by Global Citizen, a civil society group, for the absence of concrete steps on hunger. The group says, “Fifty million people are at the brink of starvation as we speak. There is no time for the G20 to issue calls to action, they are the ones who have to act.”
About climate change, leaders of the foremost economic countries agreed to pursue efforts to limit the global temperature increase to 1.5 degrees Celsius, confirming they stood by the temperature goal from the 2015 Paris Agreement on climate change. That could boost negotiations at the U.N. COP27 climate summit in Egypt, where some negotiators feared the G20 would fail to back the 1.5C goal — potentially thwarting a deal on it among the nearly 200 countries at the U.N. talks.
However, is the G20 not merely repeating old commitments from previous years or noting developments elsewhere, rather than taking on leadership themselves? When the forum last met in April, the International Monetary Fund (IMF) had just cut its global growth forecast to 3.6 per cent for this year and next and experts warned this could get worse given potential downside risks. Since then, several of those risks have materialised and the multiple crises facing the world have intensified.
The human tragedy of the war in Ukraine has worsened. So, too, has its economic impact, especially through commodity price shocks that are slowing growth and exacerbating a cost-of-living crisis that affects hundreds of millions of people and especially poor people who cannot afford to feed their families. And it is only getting worse.
Inflation is higher than expected and has broadened beyond food and energy prices. This has prompted major central banks to announce further monetary tightening, which is necessary but will weigh on the recovery. Continuing pandemic-related disruptions, especially in China, and renewed bottlenecks in global supply chains have hampered economic activity.
Indeed, the outlook remains extremely uncertain. Think of how additional disruption in the natural gas supply to Europe could plunge many economies into recession and trigger a global energy crisis. This is just one of the factors that could worsen an already difficult situation. It is already tough in 2022 and possibly going to be tougher in 2023, with an increased risk of recession. That is why we need decisive action and strong international cooperation led by the G20.
Therefore, the global economic body must practically tackle the root causes of hunger, extreme inequality and poverty, human rights violations, conflict, climate change, food, and energy price inflation. G20 must develop an economic and social rescue plan that protects the rights of the poorest people and tackles extreme inequality. If the group cannot come together and function at this time of real economic hardship, then it calls fundamentally into question its effectiveness and relevance. So, the challenge for the G20 is to prove that it is still fit for purpose coming out of these annual meetings.