G20 Financial Chiefs Flag Global Economic ‘Soft Landing’, Warn of Risks from War

RIO DE JANEIRO — G20 financial leaders indicated on Friday that the global economy is likely heading towards a “soft landing,” though they cautioned that ongoing wars and escalating conflicts could jeopardize this positive outlook. The group emphasized that increased global cooperation could bolster economic growth, according to a joint communiqué released after their two-day meeting in Brazil.

Finance ministers and central bankers from the Group of 20 major economies gathered to discuss global economic conditions and future strategies. They expressed optimism about the prospects for a soft economic landing but highlighted significant challenges, including geopolitical tensions and conflicts. The communiqué noted, “We are encouraged by the increasing likelihood of a soft landing of the global economy, although multiple challenges remain,” pointing out that wars and escalating conflicts pose notable downside risks.

The World Bank had previously forecast that global economic growth would stabilize at 2.6% in 2024, aligning with 2023 growth rates. However, the institution also warned that overall output would remain below pre-pandemic levels through 2026.

In a bid to sidestep contentious geopolitical issues, such as the conflicts in Ukraine and Gaza, the G20 financial leaders avoided explicit references to these conflicts. Instead, they focused on the broader need for global economic cooperation. Brazil, which hosted the meeting, proposed a chair statement on geopolitical matters to be addressed by G20 leaders in November. Fernando Haddad, Brazil’s Finance Minister, lauded this approach, stating, “The G20 made a wise decision to put geopolitical issues in their place to allow the cooperation agenda to move forward.”

The communiqué also celebrated the group’s first-ever declaration on taxing the world’s largest fortunes. However, it glossed over disagreements about the appropriate forum for advancing this agenda.

The financial leaders acknowledged that while economic activity had proven more resilient than expected in various regions, the recovery has been uneven, contributing to economic divergence. Risks to the economic outlook were noted as broadly balanced, with potential upside risks including enhanced global cooperation, faster-than-expected disinflation, and technological advancements such as Artificial Intelligence. Conversely, AI technology also poses potential downside risks, along with economic fragmentation, persistent inflation, extreme weather events, and excessive debt.

Climate change and biodiversity loss were highlighted as critical concerns. The communiqué emphasized that if poorer nations bear a disproportionate share of the costs associated with climate change mitigation, global inequality could worsen. “We reiterate the understanding that the cost of inaction is greater than the cost of action,” the document stated.

Additionally, the G20 called for reforms to the International Monetary Fund (IMF) to better reflect the relative positions of emerging and developing economies. The communiqué underscored the “urgency and importance of realignment in quota shares” to give these economies a more significant voice in the IMF.

Overall, the G20’s discussions reflect a balanced view of the current economic landscape, acknowledging both potential opportunities and significant risks as the global economy navigates a complex and uncertain future.