French Finance and Economy Minister Bruno Le Maire speaks during the G20 finance ministers and central bank governors meeting in Riyadh, Saudi Arabia, February 22, 2020. (Reuters)
In a joint communique released at the end of the conference, representatives of the G20 countries agreed to strengthen global risk monitoring, including the recent outbreak of COVID-19, whilst standing ready to take further action to address these risks. The communique forecast that global economic growth would pick up modestly in 2020 and 2021, with the recovery being supported by the continuation of accommodative financial conditions and some signs of easing trade tensions; however, downside risks to the outlook persist. The G20 members showed their commitment to safeguard the global economy by using all available policy tools to achieve "strong, sustainable, balanced and inclusive growth”.
The G20’s meeting took place in the context of the Institute of International Finance (IIF) recently forecasting that the COVID-19 outbreak may curb demand for oil in China and other Asian countries, depressing oil prices further, to as low as US$57 per barrel, and clouding growth prospects across the Middle East. According to Garbis Iradian, chief economist for the Middle East and North Africa (MENA) at the IIF, the virus outbreak could depress China’s gross domestic product (GDP) by 0.5 to 0.7%, which would have a dramatic impact on crude oil prices. Meanwhile, in its recent forecast, the International Monetary Fund (IMF) said global economic growth this year would decline by 0.1% compared to the previous forecast.
Under the chair of the Finance Minister and the Central Bank Governor of Saudi Arabia, officials of G20 member nations focused on discussing the development and severity of the COVID-19 epidemic, affirming their readiness to take action in response to the impact of the epidemic on the global economy. The representative of Japan warned that the COVID-19 epidemic could pose a serious threat to the macroeconomy by stagnating production activities, disrupting travel activities of people as well as goods circulation, and cutting off supply chains.
Delegates also talked ways to achieve a more balanced global tax system in the digital era. France’s Finance Minister Le Maire stressed the need to reach a consensus among G20 members on the importance of the international tax system for the sake of fairness and efficiency. He urged G20 leaders to work toward a compromise on this issue later this year. US Treasury Secretary Steven Mnuchin emphasised that in a global economy, it is impossible for different national tax systems to be in conflict with each other. In this regard, the financial leaders of the G20 endorsed a proposal which was agreed by members of the Organisation for Economic Cooperation and Development (OECD) in January, considering it as a foundation for negotiations with multinational business corporations. Under this proposal, countries will be able to tax multinational corporations, including technology corporations, that are doing business activities within their borders. This is said to be primarily aimed at the United States, which has the largest technology companies in the world.
The meeting also saw a compromise between G20 members in assessing the impact of climate change on economic growth. Delegates agreed in words concerning the content of the final communique, which mentioned the state of climate change for the first time since US President Donald Trump came to power. However, under US pressure, the final communique of the conference did not touch on the issue that climate change poses risks to global economic growth, because Washington previously opposed the draft communique with a content "macroeconomic risk related to environmental stability”.
IMF Managing Director Kristalina Georgieva said that the impact of the COVID-19 epidemic is on a "V-shaped" trajectory, with a sharp decline in China’s GDP at the present time and then a strong recovery of this country. However, the IMF chief warned that the situation could cause more catastrophic consequences for other countries, as the impact of the diseases spread widely. Meanwhile, the French Finance Minister said the question that remains open now is whether it will be V-shaped with the rapid recovery of the world economy or it will lead to an L-shape with continuous slowdown in the global economic growth momentum. These assessments show concerns over the potential risks to the health of the world economy and the strong determination of the world’s leading economies in an effort to minimise and prevent risks to global growth.