G20 is not up to today’s policy challenges

All eyes will turn to Rome this week and the 2021 G20 leaders’ summit, auspiciously taking place over Halloween.

It is welcome that global leaders are meeting and discussing common problems. G20 leaders’ summits exist to tackle key global challenges and the Rome meeting comes at a perilous time. Yet given rising nationalism, international tensions and insufficient co-operation, the probable outcomes hardly befit the gravity of the moment — through no fault of the Italian presidency. A workmanlike, professional and unexciting Rome summit is likely.

The world economy is recovering from the pandemic. The International Monetary Fund just updated its economic outlook. The global economy is slowing relative to earlier headier expectations, hit by the Delta Covid-19 variant, supply chain issues and higher energy prices. Downside risks abound.

Advanced economies, having policy space, are returning to their pre-pandemic paths. But emerging markets, with less space, will take much longer. Low-income countries face a deep hole. Financial authorities are no closer to understanding whether higher inflation is mainly transitory or a more generalised, persistent threat. Key emerging market central banks have started hiking rates. The US will soon begin tapering, while expectations for US rate hikes are being pulled forward. Fiscal policy will become highly consolidative.

 
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Πηγή: omfif.org