G20 Sees Soft Landing for Global Economy, But War Clouds Outlook

G20 finance ministers and central bankers have concluded their meeting in Brazil with a cautiously optimistic outlook on the global economy. While acknowledging the increasing likelihood of a “soft landing,” they warn of significant risks posed by ongoing conflicts and other factors.

The final communique, released on Friday, states that the G20 is encouraged by the increasing likelihood of a global economic slowdown that avoids a severe recession. However, it also highlights the significant downside risks posed by “wars and escalating conflicts,” though it avoids specific mention of the Ukraine and Gaza conflicts.

The statement acknowledges that the recovery has been uneven across countries, increasing the risk of divergence. While faster-than-expected disinflation and technological innovations are cited as positive factors, persistent inflation, economic fragmentation, and the potential downsides of AI are seen as potential threats.

The communique also emphasizes concerns about climate change and biodiversity loss, stating that inaction is more costly than action. It warns against exacerbating global economic inequality by forcing poorer nations to bear the brunt of climate change mitigation costs.

The document calls for urgent reform of the International Monetary Fund (IMF), including a realignment of quota shares to reflect current economic realities. It also reiterates the need to resist protectionist measures.

Overall, the G20 communique reflects a nuanced assessment of the global economic landscape. While optimism prevails, the statement acknowledges the ongoing challenges and emphasizes the need for continued vigilance and international cooperation to mitigate risks and promote a sustainable and inclusive recovery.