How the G20 can build on the world economy’s recent resilience

March 11, 2024 / Comments (0)

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It’s fitting that G20 finance ministers and central bank governors will meet this week at Sao Paulo’s Biennale Pavilion, designed by famed architect Oscar Niemeyer. With its flowing lines and striking façade, it is a monument to the boldness of modern Brazil.

I hope the G20 takes inspiration from this landmark to act boldly, too. With recent improvement to the global-near term outlook, G20 policymakers have an opportunity to rebuild policy momentum, setting their sights on a more equitable, prosperous, sustainable, and cooperative future.

After several years of shocks, we expect global growth to reach 3.1 percent this year, with inflation falling and job markets holding up. This resilience provides a foundation to shift focus to the medium-term trends shaping the world economy.

As our new report to the G20 makes clear, some of these trends—such as AI—hold promise to lift productivity and improve growth prospects. We badly need it—our projections for medium-term growth have declined to the lowest in decades.

Low global growth affects everyone, but has particularly troubling implications for emerging-market and developing economies.

These countries impressively weathered successive global shocks, supported by stronger institutional and policy frameworks. But their slowing growth prospects have made convergence with advanced economies even more distant.

Other factors contribute to the complex global picture. Geoeconomic fragmentation is deepening as countries shift trade and capital flows.

Climate risks are increasing and already affecting economic performance, from agricultural productivity to the reliability of transportation and the availability and cost of insurance. These risks may hold back regions with the most demographic potential, such as sub-Saharan Africa.

Against this backdrop, Brazil’s G20 agenda highlights key issues such as inclusion, sustainability, and global governance, with a welcome emphasis on eradicating poverty and hunger.

This ambitious agenda, which the IMF is working to support, can guide policymakers at this pivotal moment in the global recovery.

Finishing the job on inflation 

Central bankers are rightly focused on finishing the job of bringing inflation back to target. That’s especially important for poor families and low-income countries who have been disproportionately hit by high prices.

But the welcome progress on reducing inflation means that the question of when and how much to ease interest rates will need to be carefully considered by major central banks this year.

As core inflation remains elevated in many countries, and upside risks to inflation remain, policymakers must carefully track underlying inflation developments and avoid easing too soon or too fast.

But where inflation is clearly moving toward target, countries should ensure that interest rates are not kept high for too long.

 Brazil’s early and resolute response to surging inflation during the pandemic is a good example of how nimble policymaking can pay off.


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