The impact of war risks on the G20 and the global economy

The global economy is in a state of shock, G20 financial leaders said on Friday. probably China is heading for a “soft landing,” but has warned that escalating wars and conflicts could jeopardize that prospect, while increased global cooperation could boost growth.

In a joint statement after a two-day meeting in Brazil, finance ministers and central bank governors from the Group of 20 major economies also pledged to oppose trade protectionism. They stressed the need to reduce economic inequality. According to the statement, economic activity in many parts of the world has proven more resilient than expected. However, the recovery has been very uneven across countries, raising the risk of economic divergence.

The economic outlook remains cautious.

The document broadly balances risks to the economic outlook, citing increased economic cooperation, faster-than-expected inflation and technological innovations such as the safe development of artificial intelligence (AI) as upside risks. At the same time, however, AI technology could pose a downside risk to growth, the document said. This is in addition to economic fragmentation, persistent inflation that keeps interest rates high for longer, extreme weather events and excessive debt.

The statement warned that if poor countries were forced to bear a larger share of the costs of combating climate change, it would exacerbate global inequality. “We reiterate that the cost of inaction is greater than the cost of action,” the document said. G20 financial leaders agreed that climate change and the dramatic loss of biodiversity were major concerns.

Global Cooperation and IMF Reform

The document also called for reform of the International Monetary Fund. This would give emerging and developing economies a greater role in lending of last resort. The statement stressed the “urgent need and importance of reallocating quota shares to better reflect the relative positions of members in the global economy.”

Despite some disagreements between Russia and key Western nations, the G20 financial leaders were able to put aside their differences and agree on a joint statement. Brazilian Finance Minister Fernando Haddad welcomed the group’s first statement calling for cooperation to effectively tax the world’s largest fortunes.

Main conclusions

The global economy is likely heading towards a “soft landing,” but it is at risk of wars and conflicts.
– Global cooperation can boost growth, while trade protectionism must be addressed.
– Economic inequality must be reduced and there is a risk of economic divergence.