Group of Twenty IMF Report — IMF Annual Meetings

G-20 2020 Report on Strong, Sustainable, Balanced, and Inclusive Growth

November 2020

Prepared by Staff of the IMF with inputs from the OECD
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Executive Summary

The COVID-19 pandemic has caused great devastation and has dramatically changed the global economic landscape.[1] Since the 2019 assessment of the G-20’s progress toward strong, sustainable, balanced, and inclusive growth, the COVID-19 pandemic has spread across the world, leading to loss of lives and a deep recession in 2020. The recovery is likely to be partial and uneven, with some sectors and countries picking up faster than others. While there are tentative signs that the worst is over, uncertainty remains high as infections continue to spread. A sudden tightening of financial conditions—for instance due to adverse news on the disease front—or geopolitical and social tensions could also disrupt growth. Premature withdrawal of policy support would be costly in this environment.

The wounds inflicted by the pandemic are likely leaving deep scars, compounding underlying challenges. The pandemic has been a severe blow to people with low- and medium-skill jobs, many of which are women and youth. Sustained, strong, and inclusive growth is unlikely until the pandemic is stifled with medical solutions. Moreover, while much is still to be learned about the post-pandemic world, the transition could entail a wave of bankruptcies and a reallocation of resources between sectors, with the skills needed for the expanding activities possibly different than those possessed by the jobless. To avoid elevated structural unemployment and a loss in productivity, a reskilling of workers and efficient debt workouts will likely be required. Climate change, in the absence of strong adaptation and mitigation efforts, is likely to continue to disrupt growth, in particular in small disaster-prone economies.

Policymakers must focus on ending the crisis and begin to heal the wounds. The utmost priority is to quickly end the health crisis, support economies and people through it, and set the stage for a recovery that is not only strong and durable, but that benefits all people. This requires tackling the legacies of the crisis and addressing long-standing reform needs.

  • Continue to provide support through the crisis and bolster growth. Containing the virus requires efforts to ensure widespread testing, contact tracing, social distancing, and use of masks. Monetary and financial-sector policies should remain accommodative and help support financial stability. Fiscal authorities will need to ensure that policy support is not withdrawn prematurely as some discretionary measures—to help households, workers, and firms—expire. It will be critical to identify well-targeted measures that can replace expiring ones and that can be introduced quickly if growth threatens to fall below baseline projections.
  • Ensure a durable recovery. Public investment in healthcare, education, and physical and digital infrastructure will help promote the recovery. Structural reforms are also needed, not only to address pre-pandemic gaps, such as product market reforms to further competition, but also to enable a positive transformation and limit scarring. Notably, the crisis has revealed the need for greater digitization, especially of government services; and reforms to insolvency regimes and debt resolution systems. Strengthening childcare and active labor market policies and reskilling can also help ensure a faster return to full employment. Once the crisis is clearly abated, focus will need also to turn toward putting debt levels on a downward path to ensure longer-term debt sustainability and restore buffers.
  • Enhance access to opportunities. Decisive actions are crucial to durably reverse the rise in poverty and income inequality. This would require wider social safety nets and expanded access to essential goods and services. Enhancing access for all to health care, high-quality education, financial services, and technology would not only help prevent a crisis-driven rise in inequality from becoming permanent, it would also lift aggregate demand as economies recover.

Getting to strong and durable growth requires collaboration.

  • A global virus must be tackled with collaborative action. The G-20 policy agenda must include a collaborative global solution to ensure the development, production, and distribution of effective medical treatments and vaccines. The availability of adequate health supplies and medical solutions must be assured in all countries. This not only helps smaller and poorer economies, it would also bring the world back to normalcy more quickly, helping activity also in larger economies. Export restrictions on critical supplies should be lifted without hesitation as they limit the flow of goods at potentially great humanitarian cost.
  • The richest economies must stay committed to continued support for the poorest ones. As the crisis continues to unfold, the financing needs of developing economies continue to grow. The G-20 has already helped provide valuable debt service relief. But more needs to be done to help governments meet the needs of their populations at this time of crisis, including in the form of concessional financing, debt relief, and grants.
  • Global leaders should undertake a concerted effort to ensure the recovery is green and sustainable. The upward trajectory of global temperatures and carbon emissions must be put to an end to limit the large human and economic costs that inaction would entail. The world economy cannot afford a setback in addressing climate change as the window for limiting greenhouse gas emissions and global temperature increases to safe levels is rapidly closing. Instead, recovery from the crisis represents an opportunity to promote green investment and jobs—strengthening the economy and starting a transition away from dirty energy.
  • Other pre-pandemic challenges will also need to be tackled. These relate to international taxation to address base erosion and profit shifting and the digital taxation framework; improving debt transparency; and completing and implementing the international financial regulatory reform agenda.

[1] In support of the G-20, this report discusses the G-20’s progress during the past year toward the goal of strong, sustainable, balanced, and inclusive growth and provides policy recommendations to help reach this goal.

Prepared by Staff of the IMF with inputs from the OECD
Read the Full text PDF Format