G20 Pledges to Coordinate for Strong Global Economic Recovery

01 December 2022

The G20 nations have pledged to take coordinated actions for having a strong global economic recovery in the 17^th G20 Summit held in November 2022 in Bali, Indonesia. According to a report, the G20 economies represent 60% of the world population, 75% of international trade, and 80% of global GDP. The theme of the Bali G20 Summit under Indonesia’s presidency was “Recover Together, Recover Stronger”.

In 2021, global economies started to recover from global production and supply chain disruptions, however, the situation get worse due to Russia’s invasion of Ukraine this year. The war has created a serious global food and energy crisis as the movement of shipments has become restricted through the Black Sea. The G20 communique waxes eloquent on these, but does not provide a detailed roadmap for economies to coordinate their macro policies to “Recover Together”.

According to data, the total imports of G20 nations totaled USD 20,104 billion in 2021, and G20 exports stood at USD 19,718 billion. Here is a chart that shows the import and export value of G20 countries reported in 2021.

The developed economies are largely inwardly focused and have little inclination to think about the impact of their macroeconomic policies on the developing world. So, how G20 nations will recover together?

The United States, the world’s largest economy has developed a policy that is inwardly focused on taming inflation at any cost by aggressively raising interest rates. It has imposed heavy costs on developing economies, whose currencies are losing value rapidly, making it more costly to import food and energy.

Today, macroeconomic coordination is far more challenging because every economy is under pressure to tighten fiscal and monetary policies, which were loosened a lot during the Covid crisis. The policy direction is opposite to what we saw after the 2008 global financial crisis.

If most G20 economies are tightening and collectively taking strategic actions, a sharp global economic slowdown and a lot of pain must ensue. The G20 Presidency is coming to India next year in the most challenging of times. Under India’s stewardship, G20 will have to discuss how this policy of hard landing, especially in the United States and the European Union, can be calibrated to minimize damage to poor countries. It’s a bumpy road ahead.