Business / Economy

G20 finance chiefs warns of sharp contraction from pandemic

by Keita Nakamura

Kyodo

Finance chiefs from the Group of 20 major economies said Sunday that the global economy is expected to “contract sharply” this year from the coronavirus pandemic and pledged to do whatever they can to minimize the risks.

“We are determined to continue to use all available policy tools to safeguard people’s lives, jobs and incomes, support global economic recovery, and enhance the resilience of the financial system,” although the economic outlook “remains highly uncertain,” they said in a statement issued after a videoconference.

As for the G20’s debt relief program to help curb the spread of the virus, the finance ministers and central bank governors said an estimated $5.3 billion has been requested to be deferred as of Saturday by 42 developing countries.

While welcoming the “progress achieved” under the program, the G20 countries said, “All official bilateral creditors should implement this initiative fully and in a transparent manner.”

To encourage developing countries to take action against the virus, the G20 nations said at the previous virtual meeting in April that they and the “Paris Club” countries — those like the G7 nations who traditionally lend to developing countries — had agreed to suspend debt payments from “the poorest countries” from May 1 through the end of the year.

Amid mounting concern about capital outflows from emerging economies, the G20 nations said in the latest statement that a “possible extension” of the debt relief program will be considered in the second half of this year, taking account developments with the COVID-19 pandemic.

The ratio of the 59 poorest countries’ outstanding obligations to China to the sum of their gross domestic products came to 11.6 percent in 2016, or about four times that owed to the Paris Club nations, according to an IMF report in 2018.

Finance Minister Taro Aso and Bank of Japan Gov. Haruhiko Kuroda participated in the videoconference.

The G20 also discussed new international taxation rules for major digital companies such as Google LLC, Facebook Inc., Apple Inc. and Amazon.com Inc., amid claims they have not been paying their fair share of taxes.

The finance chiefs said they will continue talks on the rules aiming to narrow differences and maintain their “cooperation for a globally fair, sustainable, and modern international tax system.”

The videoconference came amid growing uncertainty about the future of the economy as the global spread of COVID-19 shows no signs of waning. Total coronavirus infections have topped 14 million cases, according to a tally by Johns Hopkins University.

In reports released last month, the IMF said it projected the world economy would contract 4.9 percent this year, while the World Bank forecast a 5.2 percent shrinkage, with the pandemic triggering the worst global recession since the Great Depression in the 1930s.

The G20 finance chiefs were originally to hold a two-day meeting from Saturday in Jeddah, Saudi Arabia, but it was switched to a half-day teleconference due to the pandemic. The next talks are scheduled for Oct. 15 to 16 in Washington on the sidelines of the IMF and the World Bank Group’s annual fall gatherings.

The G20 groups Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United States and the European Union.

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