G20 Sustains Economic Recovery Amid Escalating Global Challenges

Jakarta, 26 May 2022 – Indonesia’s Ministry of Finance and Bank Indonesia have recently held the second Framework Working Group meeting (2nd FWG) – as a part of the G20 Indonesia Presidency series of meetings on 24-25 May 2022 in Jakarta. This meeting was conducted in a hybrid format and attended by all G20 members, invited countries (invitees), as well as international organizations, such as International Monetary Fund (IMF), Organization for Economic Cooperation and Development (OECD), World Trade Organization (WTO), World Bank, and the Bank for International Settlements (BIS). During the meeting, notable external speakers from both academics and private sectors also provided various perspectives on the issues that were the main focus of the meeting.

The discussion in the 2nd FWG meeting is a follow-up to the first FWG meeting in January 2022 and the second meeting of the Minister of Finance and Central Bank Governors (2nd FMCBG) in April 2022. During the first FWG Meeting, G20 members have strongly supported the priority areas promoted by the Indonesian Presidency, namely: (i) Strong, Sustainable, Balanced and Inclusive Growth (SSBIG) across the G20; (ii) monitoring global economic risks over the near and medium term; and (iii) monitoring climate-related macroeconomic risks and implications for macroeconomic policy.

The 2nd FWG meeting deep-dived into the current global economic situation and priority areas of the Presidency, namely the global economic outlook and risks, macroeconomic impact of climate change and the scarring effect. During the first day, the delegates discussed the current outlook and various risks to the global economy that have continued to elevate, especially those triggered by the war in Ukraine, the prolonged high global inflationary pressures, and the impact of the faster than expected monetary policies tightening in numerous countries. One of the subjects raised on the first day of the discussion was the concern of global food and energy security, which can hinder economic recovery and suppress welfare for many countries. In this regard, members underscored the importance of continued international coordination and collective actions to address these challenges.

Nella Sri Hendriyetty, Indonesia Presidency Co-Chair

Meanwhile, on the second day of the meeting, the main issue of the discussion was the impact of climate change on the macroeconomy and efforts to mitigate it. The Head of the Center for Regional and Bilateral Policy of the Indonesia Ministry of Finance, Nella Sri Hendriyetty, who acts as the Co-chair of the Presidency stated, ” It is necessary for the G20 to mitigate the impacts of the climate change collectively rather than individually. We need to take into account country-specific circumstances while mitigating against and understanding the effects of policies in addressing climate change.” The second issue discussed was the scarring effect due to the COVID-19 pandemic. On this occasion, the Indonesia Presidency presented the initial findings of the survey regarding the exit strategies and policies to address the scarring effect to sustain the recovery, which was circulated among G20 member countries. One of the findings presented was the plan of members to gradually withdraw the Covid-19 pandemic-related policy supports, including tax stimulus. Some of the factors considered in implementing this strategy includes: improving COVID-19 pandemic situation, progress of economic recovery, increasing productivity, rising incomes, and improving labor market conditions. Regarding the scarring effect, Anantha Nageswaran, the Indian Co-chair, underlined that, ” Of all the damages caused by the pandemic, the one that should worry us the most is the years of lost education, learning, and the attendant social skills among our children.”.

The discussions of the 2nd FWG meeting will be one of the key inputs for the third Finance Minister and Central Bank Governors (3rd FMCBG) meeting to be held in July 2022. Furthermore, FWG will continue to monitor the global economic situation and its various risks. The FWG will also continue to encourage discussions and synergies among G20 member countries to address multiple challenges to realize a strong, sustainable, balanced, and inclusive global economic recovery.

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