The recent G20 meeting, held in Riyadh, was attended by ministers and central bankers from the world’s most influential economies. The 2020 meeting marked a first for Saudi Arabia as they took on the role of presidency for the event – a feat that no other Arab nation has achieved to date. Amid discussions and meetings, the common thread throughout revolved around the theme: “Realizing Opportunities of the 21st Century for All”.
The World Economy
The global economy appears to be growing at a slow pace, with potential risks lying in geopolitical issues, unresolved trade tensions, and policy uncertainties. However, there are also expectations for economic growth in the coming years of 2020 and 2021. This is largely due to an easing in trade tensions and the implementation of a looser monetary policy.
IMF’s Outlook on The Global Economy
The International Monetary Fund (IMF) expressed a positive outlook for the global economy at the recent G20 meeting. They predicted a “V-shaped, rapid recovery”. Despite this encouraging prospect, they were quick to point out unknown factors, such as the Coronavirus (COVID-19) outbreak, which could impact this forecast.
In addition to health-related crises, the IMF also highlighted other potential risks including an increase in debt levels amongst certain nations, along with the impending threat of climate change.
Proposal for a Global Taxation System
Discussions at the G20 meeting also touched upon the development of a new global taxation system. Designed for the digital era, the proposed system would allow governments to tax digital companies where business is conducted, as opposed to where they are registered for tax purposes. India, amongst others, has called for better collaboration between international revenue agencies to control tax evasion, especially by offenders crossing borders to dodge investigations.
G20 – An Overview
The G20 is an informal group that includes 19 countries and the European Union, along with representatives from the International Monetary Fund and the World Bank. G20 member nations represent some of the largest advanced and emerging economies worldwide.
Collectively, they account for about two-thirds of the world’s population, 85% of global gross domestic product, over 75% of global trade, and 80% of global investment. The G20 does not follow a formal organisational structure and has no permanent secretariat or management body.
Origin and Evolution of The G20
The G20 was born out of the Asian Financial Crisis between 1997-1999. Originally conceived as a ministerial-level forum, it began as a meeting of finance ministers and central bank governors from developed and developing economies who had been invited by the G7. By 2008, amidst a global financial crisis, the need for building consensus at the highest levels of leadership was recognized, leading to annual meetings of the G20 leaders.
Members of The G20
The G20 consists of Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union.
Understanding V-Shaped Recovery
A crucial term to understand in this context is a ‘V-shaped recovery’. Typical of a V-shaped recovery is a sharp decline in the economy, followed by a quick and lasting recovery. For example, the recession of 1953 followed this trend. This is different from an ‘L-shaped’ recovery, which describes a scenario in which a slump in the economy lasts for a prolonged period.