BALI G-20 SUMMIT
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Context: Leaders of the G-20 nations will gather at Bali’s Nusa Dua resort for the 17th summit of the world’s most advanced economies. G-20 countries represent 85% of the global GDP, 75% of global trade and 66% of the world population.
- While the focus will be on post-pandemic recovery and dealing with energy and food security impacted by the Russian war in Ukraine, much interest will be around which leaders choose to hold bilateral summits on the sidelines.
- Notable by his absence is Russian President Vladimir Putin, who had earlier accepted Indonesian host President Joko Widodo’s invitation, but as the war with Ukraine continues, has sent his Foreign Minister Sergey Lavrov to represent Russia.
What is the agenda of this summit?
- The motto for this G-20 is Recover Together, Recover Stronger.
- The leaders will engage in discussions over three sessions: on Food and Energy security, Health Partnership for Global Infrastructure and Investment, and Digital Transformation.
- The Bali summit will have three key priorities.
- Global Health Architecture: This involves deliberations towards strengthening global health resilience and making the global health system more inclusive, equitable, and responsive to crises.
- Digital Transformation: Deliberations here have centred on achieving the full potential of rapid digitalisation of the global economy by creating a new landscape of cooperation among nations.
- Sustainable Energy Transition: Under this rubric, the discussions have focussed on ways to accelerate the transition towards cleaner energy sources. In particular, since any such transition requires substantial investments, the efforts have been focussed on finding a platform for such investments.
- Prime Minister Narendra Modi is also set to spell out his agenda for the year ahead under India’s G-20 presidency, with special focus on the Global South and the problems it is facing due to geopolitical tensions, food and fuel shortages.
What is at stake?
- Since the October 2021 summit in Rome, prospects of the global economy have worsened.
- Between themselves, the G20 countries account for 60 per cent of the world’s population, 80 per cent of the world’s GDP and 75 per cent of the world’s exports. As such, they contain the engines of global growth.
- However, recent report of the International Monetary Fund on G20 countries shows that most of the G20 constituent countries have suffered significant output losses since the start of the pandemic.
- India, for instance, would have lost almost 14 per cent of its total output — the highest loss among all G20 countries.
Why have prospects worsened?
- For one, Russia’s invasion has not only created massive geopolitical uncertainty but also spiked global inflation, thanks to supply bottlenecks and curbs across a whole host of commodities.
- The associated sanctions by the West have further queered the pitch.
- Persistently high inflation — at historic highs in several countries — has eroded purchasing power across these countries, thus dragging down economic growth.
- Two, in response to high inflation, central banks across countries have raised interest rates, which, in turn, have dampened economic activity further. Some of the biggest major economies such as the US and the UK are set to face a recession; others, such as those in the euro area, are likely to slow down to almost a halt.
- Three, China, one of the major engines for global growth, is witnessing a sharp slowdown as it struggles with a real estate crisis.
- Lastly, the world economy is struggling with geopolitical rifts such as the tensions between the US and China, the two biggest economies in the world, or the decline in trade between the UK and the euro area in the wake of the Brexit decision.
What makes this G-20 different from others?
- For the world, this is the first G-20 since Russia began the war in Ukraine and the west imposed sanctions on Russia. Efforts will be made to build global consensus over issues that have clearly divided the world.
- For India, the importance of the summit of the world’s most advanced economies is that it is India’s turn to host the summit next. India will assume the presidency on December 1.
- The Indonesian President has also invited the Ukrainian President to address the summit virtually, while Russian President Putin, and leaders of Mexico and Brazil (which is in a leadership transition), will not attend the summit.
- Created in 1999 as an acceptable medium between the more “elitist” G-7 (then the G-8), and the more unwieldy 38-member Organisation for Economic Co-operation and Development (OECD), the G-20 was conceived in a more unified, post-Soviet era, when western economies made the rules, China was just on the rise and Russia was still recovering from its breakup.
- Over the past two decades, the global economic balance has shifted, and the G-20 has been seen as a more representative and egalitarian grouping of global leadership, and was particularly useful in steering the global economy after the global financing crisis and banking collapse of 2008.
- Significantly, next year the “Troika” of G-20 will be made up of emerging economies for the first time with India, Indonesia and Brazil — an indicator of the shift in the global economic agenda towards the Global South.
- For global prospects to improve, two things are certain. One, the G20 countries can grow faster if they grow together.
- Two, such growth, in turn, requires peace. Given the scope of G20 countries, the summit thus affords an opportunity for the leaders to find common ground and iron out the creases in the policy landscape.
- According to the IMF, “the overarching priority for policymakers in most economies is to ensure price stability, while bringing down debt levels and protecting the most vulnerable”.
- In other words, the first job at hand is to contain raging inflation. But at the same time, governments have to find ways to help the vulnerable without necessarily ballooning the debt levels. A key concern in this regard would be to ensure that external risks are carefully monitored.
- Secondly, as the IMF said, “a strong, sustainable, balanced, and inclusive recovery requires joint action by the G-20”. This kind of joint action, in turn, requires not just securing peace in Ukraine but also “help prevent further fragmentation”.
- On trade, the G20 leaders need to push for a “more open, stable, and transparent rules-based trade” that would help address global shortages of goods. “Strengthening the resilience of global value chains would help protect against future shocks,” said the IMF.
- Lastly, as is mentioned in one of the three key priorities for the Bali summit, “a durable recovery requires multilateral action on climate, debt, taxation, and pandemic preparedness”.