G-20 Expresses Confidence in Global Economy’s Soft Landing

In a draft communique ahead of the G-20 meeting in Brazil, finance chiefs expressed a growing optimism about the global economy’s prospects, suggesting an increased likelihood of a soft landing. The document highlights faster-than-expected disinflation as a key upside risk contributing to the improved outlook.

The draft acknowledges the challenges posed by conflicts in various regions without explicitly naming them, underscoring the sharp divisions evident at the gathering, particularly regarding conflicts in Ukraine and Gaza. Despite geopolitical tensions, the statement portrays a relatively upbeat view of the global economy, which has faced challenges stemming from the pandemic, inflationary pressures, and interest rate hikes.

According to the draft, inflation has receded in most economies, aided by appropriate monetary policies, easing supply chain bottlenecks, and moderating commodity prices. However, it warns of the potential for adverse inflationary dynamics to persist, leading to persistently tight financing conditions.

The International Monetary Fund’s recent upward revision of global economic growth forecasts for 2024 to 3.1% is cited as a positive development, attributed to better-than-expected expansions in the US and fiscal support from China. Treasury Secretary Janet Yellen emphasised the pivotal role of the US in underpinning global growth, while acknowledging risks posed by prolonged conflicts in Ukraine and the Middle East, which have impacted commodity prices and disrupted supply chains.

The draft communique reflects extensive negotiations among G-20 officials, particularly concerning language related to military conflicts like Russia’s invasion of Ukraine, which has had widespread economic repercussions. Brazil, as the host nation, is striving to advance an agenda focused on poverty alleviation, sustainable development, and global institutional reform, amid ongoing divisions within the group.

As ministers convene to finalise the communique, efforts are underway to address contentious topics and prevent them from overshadowing broader economic discussions. Despite the challenges posed by geopolitical tensions, the G-20 aims to provide a consensus view on the global economy and chart a path forward to address the challenges ahead.