G20 3rd Finance Minister and Central Banks Meeting - Session I: Macroeconomic outlook
25 July 2024
As G20 Ministers and Governors, you deserve recognition for facillitating the soft landing of the larger part of the global economy.
But we should not forget the pain that many are going through after years of cascading crises and high interest rates. That is why we face two distinct kinds of danger: first, to believe that averages tell the story for everybody; and second, to fall into the trap of complacency.
The global economy has landed, but in a runway of low growth, high debt, weak trade, and falling investment.
We project global economic growth this year at below 3% with developing economies growing by at 4.1%, led by the large emerging economies present in this room; Least Developed Countries, on the other hand, are a tenth poorer than they would have been before COVID. Among developed economies, the US is performing beyond expectations.
We are also concerned that much of this growth, at a global level, is being fueled not by productive investment, but by debt-driven consumption, which is expected to outpace income growth by 1.4 percentage points. Meanwhile, international investment is in downright contraction.
We estimate that FDI flows declined by almost 10% last year, with new funding for SDG sectors falling as much, with the developing countries experiencing negative capital flows pressuring exchange rates.
Renewable energy investments, key to achieving the Paris agreement, are also NOT flowing to developing countries at the scale needed, with Africa receiving only 2% of total global flows.
Debt burdens in the Global South are driving a development crisis, as countries do everything possible to avoid default, given the pain they would have to go through to restructure their debt. 3.3 billion people live in countries that spend more on debt servicing than on either health or education; and 5.6 billion people live in countries with deteriorating public sector debt sustainability.
The sooner we realize that kicking the can down the road will not solve the issue, the better it will be for all – creditors & debtors alike.
Lastly, global trade fell in 2023. And although we expect a more positive outcome this year, trade growth is still very low.
The disruption in maritime transport : the Red Sea, the Black Sea, and the Panama Canal, together with rising protectionism, have severely disrupted global supply chains. Ships are taking longer and more polluting routes to reach their destinations.
Your excellencies,
Most of the world economy has had a soft landing; but as a whole we have landed on a road where SDGs fade into the distance, replaced by a bleak horizon of missed opportunities and broken promises.
The G20 has a critical role to play to face the liquidity, investment and debt constraints most of the developing countries face, for them to achieve higher and more sustainable rates of growth. The MDB reform agenda, the Common Framework stock take, continuing efforts towards making full use of SDRs and allocating them to MDBs, the SDGs stimulus put forward by the UN, and progressive taxation are just some of the levers we have to get the plane back up.
There are solutions at the hand of the G20, opportunities to be tapped into. I hope the G20 can seize this moment under the able leadership of Brazil
I thank you.
