G20 leaders gather in Bali, Indonesia, on 15-16 November amid an increasingly gloomy global outlook, growing fragmentation and cries for collective action. There will be much excitement. The opportunity for global leaders to meet and hold bilaterals is highly welcome. But key challenges are not likely to be well addressed and accomplishments will be few and far between. Geopolitical strife unfortunately dealt the Indonesian presidency a tough hand, despite the country’s good efforts and decades of successful hard work to strengthen Indonesia’s global standing.
High drama surrounds Russia’s attendance and an anticipated bilateral meeting between US President Joe Biden and Chinese President Xi Jinping on 14 November.
Reports indicate a marginalised Vladimir Putin will not show up in person. That’s not surprising, given that in 2014 he hurriedly left the Brisbane summit when he came under fire for his actions in Crimea and Donbas. Any physical appearance in Bali would rightly open Putin to huge global condemnation for his barbaric war against Ukraine. But might he switch on his Zoom for a few minutes? Regardless, it’s hard to see Bali advancing progress in ending Russia’s invasion.
Hopefully, the Biden-Xi bilateral will enhance understanding about US/Chinese differences and nurture restraint. Perhaps Xi can be exhorted to play a greater behind-the-scenes role in pressuring Russia. But major progress on the bilateral relationship shouldn’t be expected, impeding efforts to tackle global commons. Especially with presidential elections two years away, the US may veer towards an even harsher line on China. Xi, given his autocratic style, economic woes at home and Biden’s recent chip decision, has domestic reasons to play the anti-US card.
The September 2009 G20 leaders’ summit in Pittsburgh designated the G20 as ‘the premier forum for international co-operation’. But the global economic agenda appears stalled amid waning multilateralism.
Next year’s outlook for the languid global economy only worsens. Higher energy prices and hikes by the Federal Reserve may push the US into a mild recession. Europe is already there with higher energy costs being borne by consumers. The European Central Bank is hawkishly tackling cost-push inflation over which it has limited impact. China still faces pandemic lockdowns amid deep housing woes, excess leverage and looming demographic trends. With key major economies facing differing cyclical positions and inflation outlooks, they will pursue their individual macroeconomic paths.
Climate change is the greatest challenge facing humanity. The Bali summit will take place on the heels of COP27. The Biden administration, with the Inflation Reduction Act, has made a significant contribution to curbing US emissions. COP27 may generate some useful outcomes. But attaining the Paris climate goals is increasingly illusory. The combined climate pledges of Paris agreement parties put the world on track for around 2.5 degrees Celsius of warming by the end of the century, not the sought after 1.5 degrees.
During an event hosted by OMFIF, International Monetary Fund Deputy Managing Director Bo Li explained that the IMF estimates a $75 per tonne carbon price is needed by the end of this decade to meet climate goals, but the current global price is $6 per tonne. He observed that advanced economies have yet to fulfill their previous pledge to provide $100bn per annum for adaptation and mitigation projects to emerging markets and developing countries. Massive investments of some $3tn-$6tn annually are needed through 2050 by scaling up private finance, but currently only $630bn is being mobilised and most does not reach EMDEs. Hopes run high that COP27 and the G20 may begin to unlock significant climate finance and begin multilateral development bank reform plans to support that goal, but the jury is out.
Low-income country debt distress is rampant. Yet the G20’s common framework to bring non-traditional official creditors – mainly China – into a set of Paris Club-like principles and tackle distress remains a flop, despite some potential steps on Zambia. China and the private sector continue to stand in the way of progress, dragging their heels in accepting losses on their unsustainable lending. Why would any finance minister sign up for the framework when there have been no deals, and China – the key player – is at best reluctant?
Governance of the international financial institutions remains another messy challenge. IMF quota reform, slated for 2023, seems improbable given US/China tensions. Whether the G20 can agree on steps to overcome the World Bank’s perceived passivity on climate issues is an open question. The World Trade Organization remains crippled, with countries eschewing multilateralism for plurilateralism.
The G20’s breakthrough deal on international tax reform is hung up on implementation problems.
Indonesia has emphasised global health architecture, digital economy transformation and the energy transition as key priorities. There may be some valuable deliverables in these areas, particularly the Financial Intermediary Fund for Pandemic Prevention, Preparedness and Response.
The Bali summit unfortunately is taking place amid tremendous geopolitical strife. It’s always good for leaders to gather and talk, even if not much is accomplished, and endorse useful technical work quietly occurring behind the scenes. Yet, even apart from Russia’s brutal invasion, the G20’s ability to tackle global challenges is constrained by US/China tensions, growing fragmentation and the ever-present limitations on leaders’ abilities to think internationally given national priorities. Beyond the Bali excitement, low expectations are in order for this year’s G20 summit.
Mark Sobel is US Chair of OMFIF.