BackG-20 finance chiefs on alert with world economic growth at risk
Countries such as Japan, and institutions including the OECD, have been pushing for nations with surpluses to spend more to help avert a deeper economic slump
PremiumFinance chiefs and central bankers from the world’s largest economies say they see downside risks to global economic growth persisting as a viral outbreak raises uncertainty and disrupts supply chains.
While delegates at the Group of 20 meeting in Riyadh, Saudi Arabia, spent much of their time talking about a response to the outbreak that originated in China, their final communique didn’t once mention the epidemic. And although it said the participants agreed on a “menu of policy options" to counter the emergency, the statement included no details.
The coronavirus has so far killed more than 2,300 people and infected about 80,000. Countries such as Japan, and institutions including the OECD, have been pushing for nations with surpluses to spend more to help avert a deeper economic slump.
The G-20 countries “agreed to be ready to intervene with the necessary policies related to these risks," Saudi Finance Minister Mohammad Al Jadaan said Sunday in remarks concluding the meetings at the Ritz Carlton Hotel in the Saudi capital. “Global economic growth is continuing but remains slow and downside risk persists, including those arising from geopolitical, remaining trade tensions, as well as policy uncertainty."
China’s representatives were absent from the G-20 gathering as authorities there focus on countering the fallout. The world’s second-largest economy is likely to pick up quickly after the coronavirus is contained and stage a “V-shaped" recovery, according to Chen Yulu, a deputy governor at the People’s Bank of China.
International Monetary Fund Managing Director Kristalina Georgieva said Saturday the outbreak had led the lender to cut its forecast for Chinese growth to 5.6% from 6% and to trim 0.1 percentage points from its global growth forecast, but that it’s also looking at more “dire" scenarios.
Budget Appeals
Germany was the primary target of the calls for more spending. So far, the export-driven country has showed little interest in significantly boosting expenditures, arguing fiscal stimulus can’t bolster foreign demand.
“Fiscal policy should be flexible and growth-friendly while ensuring debt as a share of GDP is on a sustainable path," the communique said. “Monetary policy should continue to support economic activity and ensure price stability, consistent with central banks’ mandates."
The delegates managed to extract a key concession from the U.S. by including a mention of climate change in the final communique. Jadaan called it a “very important issue" on the Saudi agenda.
The concession came after several days of heated debate, including France finance chief Bruno Le Maire cornering Treasury Secretary Steven Mnuchin late Saturday as the G-20 economic leaders dined, according to two people familiar with the matter.
A Treasury spokeswoman didn’t reply to a request for comment.
Tax Debate
The final communique didn’t include any breakthroughs on efforts to introduce a global minimum tax or a tax system for multinational tech giants like Alphabet Inc.’s Google and Facebook Inc., according to the people.
Europeans have balked at a U.S. proposal that new global rules should be a “safe harbor" regime. If there’s no agreement, several European nations, who have called for an agreement by year-end will go ahead with taxes on revenues of multinational digital firms. That could spark a transatlantic trade war as the U.S. says such measures are discriminatory and has already threatened France with tariffs.
France and the U.S. have held tense discussions on the subject since France introduced a 3% levy last year on the digital revenue of companies that make their sales primarily online. The move was supposed to give impetus to international talks to redefine tax rules, and the government has pledged to abolish its national tax if there is agreement on such rules.
“We’re striving between now and July 2020 -- whether at the Berlin OECD conference or the meetings in Jeddah of the G-20 ministers -- to reach an agreement related to the tax," Al Jadaan said.
The governments said they’d work to resolve remaining differences and reaffirmed their commitment “to reach a consensus-based solution with a final report to be delivered by the end of 2020," according to the communique. It also said that measures would be considered against jurisdictions that don’t comply with internationally agreed tax standards.
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