A G20 Brazil sign, in Rio de Janeiro, Brazil, on Feb. 15.PABLO PORCIUNCULA/Getty Images
Group of 20 finance leaders meeting in Brazil this week are expected to make only a passing reference in their closing statement to regional conflicts, according to a draft version seen by Reuters, due to deep divisions over wars in Gaza and Ukraine.
The draft communiqué, far shorter than previous years as host nation Brazil works to sidestep geopolitical controversies, also said the likelihood of a soft landing in the global economy has increased, but uncertainty remains high.
“Risks to the global economic outlook are more balanced,” with faster-than-expected disinflation and more growth-friendly fiscal consolidation underpinning growth, the draft said.
Kristalina Georgieva, head of the International Monetary Fund said the overall impact of wars was always negative, and the Israel-Gaza war was clearly adding to uncertainty for the global economy at a time of sluggish growth.
But she said it was still crucial for G20 finance officials to gather, noting that the recent agreement on digital services at the World Trade Organization showed co-operation still worked.
“Nobody wants any further deterioration in economic relations,” she told Reuters in an interview. “Talking with each other is the only way we can steer the world to a better performance.”
Last week’s gathering of foreign ministers in Rio de Janeiro exposed deep divisions over Russia’s invasion of Ukraine and Israel’s bombardment of Gaza. After that meeting, G20 finance officials are expected to set aside geopolitics and focus on global economic issues as they gather in Sao Paulo this week.
The draft communiqué being fine-tuned by deputy finance ministers reflects a delicate effort to acknowledge regional conflicts while maintaining consensus, which Brazil has emphasized during its presidency of the G20 major economies.
“Among the downside risks to the global economy are [wars and] escalating conflicts, geoeconomic fragmentation, rising protectionism and trade routes disruptions,” the draft communiqué said.
The reference to “wars” in brackets reflects efforts to reach a consensus on the final language, said a person familiar with the matter.
Brazil’s co-ordinator of the finance track at G20, Tatiana Rosito, said on Tuesday that the group is moving toward a short communiqué that reflects Brazilian priorities.
While wars in Ukraine and Gaza may get no direct mention in the joint communiqué and less emphasis in plenary sessions, they were boiling over on the sidelines.
U.S. Treasury Secretary Janet Yellen on Tuesday called on allies to move forward urgently to unlock the value of frozen Russian sovereign assets to help Ukraine, prompting an angry response from Russian officials.
Canada threw its support behind the U.S. idea with Finance Minister Chrystia Freeland saying on
Tuesday the two countries agreed on the urgent need to move forward with confiscating frozen Russian sovereign assets to help Ukraine.
She and G7 peers are expected to discuss the matter during a separate meeting on Wednesday morning.
But Russian Finance Minister Anton Siluanov warned that Yellen’s proposal, if realized, would lead to a response that could escalate tensions.
“We believe this proposal to be deeply fallacious and also destructive because it undermines the very foundation and pillars of the world financial system,” he told reporters.
On the conflict in Gaza, Yellen said Israel has agreed to resume tax revenue transfers to the Palestinian Authority to fund basic services and bolster the West Bank economy. She called on Israel to allow commerce to resume there for the sake of its own economy and that of the Palestinians.
Progress on Brazil’s proposed communiqué is advancing smoothly into the home stretch, a German government representative said on Tuesday.
“The whole thing is progressing very well,” the official told a press briefing in Germany, adding that the final document would highlight global economic resilience, while noting issues such as inequality between countries and excessive debt.
Brazil’s President Luiz Inacio Lula da Silva is pushing to give developing nations of the Global South more voice in G20 meetings during Brazil’s presidency, reflected in the draft communique’s focus on addressing hunger, poverty and inequality.
Finance officials and central bankers from the G20 are meeting at a time of lingering global economic uncertainties, increasing strains of record debt burdens, and worries that inflation may not yet be tamed.
In the draft communiqué, the G20 finance leaders gave an optimistic view on the outlook for price pressures. Inflation has receded in most economies, they said, thanks in part to “appropriate” monetary policies, easing supply chain bottlenecks and moderating commodity prices.
The draft also said the G20 group reaffirms their existing exchange-rate commitment, which warns against excess volatility and volatile currency moves as undesirable for economic growth.