RIO DE JANEIRO: G20 financial leaders said on Friday the global economy was likely heading for a “soft landing”, but warned wars and escalating conflicts could endanger this outlook, while more global cooperation could make growth stronger. In a joint communique after a two-day meeting in Brazil, finance ministers and central bankers from the Group of 20 major economies also committed to resist protectionism in trade and stressed the need to reduce economic inequalities.

Last month, the World Bank forecast that the global economy would avoid a third consecutive decline in growth since a major post-pandemic jump in 2021, with 2024 growth stabilizing at 2.6 percent, in line with 2023, but warned that overall output would remain well below pre-pandemic levels through 2026. “We are encouraged by the increasing likelihood of a soft landing of the global economy, although multiple challenges remain,” the communique said. “Downside risks include wars and escalating conflicts,” it said.

By avoiding explicit mention of the conflicts in Ukraine and Gaza, diplomats have worked to sidestep the disagreements between Russia and major Western nations that derailed a consensus at the finance chiefs’ gathering in February. To defuse the disagreement, Brazil drafted a chair statement on geopolitical issues, stressing that these matters will be addressed by G20 leaders in November.

“The G20 made a wise decision to put geopolitical issues in their place to allow the cooperation agenda to move forward,” Brazil Finance Minister Fernando Haddad told a news conference. Haddad also hailed the group’s first-ever declaration calling for cooperation to effectively tax the world’s largest fortunes, although that separate joint statement papered over disagreements about the right forum to advance the agenda. The G20 communique said economic activity had proved to be more resilient than expected in many parts of the world, but the recovery had been highly uneven across countries, contributing to the risk of economic divergence.

Balance of risks

The document flagged risks to the economic outlook that remain broadly balanced, with more economic cooperation, faster-than-expected disinflation and technological innovations, like the safe development of Artificial Intelligence (AI), cited among upside risks. But at the same AI tech could also turn out to be a downside risk to growth, the document said, along with economic fragmentation and persistent inflation keeping interest rates higher for longer, extreme weather events, and excessive debt. Climate change and significant loss of biodiversity were key topics of concern, the G20 financial leaders agreed, warning that if poorer nations had to shoulder more of the cost of fighting climate change, it would make global inequality worse.

“We reiterate the understanding that the cost of inaction is greater than the cost of action,” the communique said. The document also stepped-up language calling for a reform of the International Monetary Fund, that would give emerging and developing economies a bigger say in the lender of last resort. The G20 communique underlined the “urgency and importance of realignment in quota shares to better reflect members’ relative positions in the world economy.”

G20 nations have also agreed to work together to make the super-rich pay their taxes, but stopped short of a more substantial deal, according to a declaration adopted Friday after a meeting of finance ministers in Rio de Janeiro. The thorny topic of tackling tax-dodging billionaires dominated the two-day meeting in the Brazilian city.

The initiative is a key priority for Brazilian President Luiz Inacio Lula da Silva, who heads this year’s grouping, which includes the world’s major economies, the European Union and the African Union. Lula was hoping for a minimum tax on the moneyed elite, but the final statement represents a compromise on a topic that divided member states.

“With full respect to tax sovereignty, we will seek to engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed,” said the statement.

“Wealth and income inequalities are undermining economic growth and social cohesion and aggravating social vulnerabilities.”

Brazil’s Finance Minister Fernando Haddad said that “from a moral point of view it is important that the twenty richest nations consider that we have a problem, which is to have progressive taxation on the poor and not on the rich.”

The United States and Germany dismissed the need for a global deal on taxing billionaires, an initiative which is backed by France, Spain, South Africa, Colombia and the African Union. International Monetary Fund chief Kristalina Georgieva hailed the G20’s position on “tax fairness.” “The shared vision of G20 Ministers on progressive taxation is timely and welcome, as the need to rebuild fiscal buffers while also attending to social and development needs involves difficult decisions in many countries,” she said in a statement. 

French economist Gabriel Zucman, who authored a report on taxing the rich, welcomed the fact that “for the first time in history, there is now a consensus among G20 countries that the way we tax the super-rich must be fixed.”

“Now it is time to go further,” said Nobel Prize-winning economist Joseph Stiglitz on Friday, urging heads of state to coordinate minimum standards by November. “The climate crisis is expected to cost trillions of dollars every year and it is outrageous to expect that the regular taxpayer should pay for it, while the super-rich evade taxes,” said Camila Jardim of Greenpeace Brazil.

On the sidelines of the thorny tax discussions, US Treasury Secretary Janet Yellen and Brazilian Economy Minister Haddad announced on Friday the signing of a partnership on climate protection.

Founded in 1999, the organization was originally focused on global economic issues but has increasingly taken on other pressing challenges -- even though member states do not always agree on what should be on the agenda. — Agencies