A Growth Agenda for the G20

When South Africa takes over the G20’s rotating presidency later this year, it will be the fourth consecutive developing country to do so. 

It will also be the third consecutive member of the Brics grouping of major emerging economies, and the first African country, to take the helm. 

At long last, Africa’s economic priorities – together with the priorities of developing countries more broadly – will feature prominently on the G20 agenda. 

But in an increasingly fractured world of insular domestic politics and growing disdain for multilateralism, delivering progress on such an agenda will not be easy. And things might be about to get even tougher. 

South Africa’s G20 presidency begins at the end of the biggest election year in world history – a year during which half of the G20’s members will have gone to the polls. 

Votes in some countries – not least the United States – may well reinforce the shift toward protectionism and away from multilateral cooperation, including on crucial reforms to international financial institutions like the World Bank and the International Monetary Fund.

GEOPOLITICAL RIFTS

A successful G20 presidency will require South Africa to revive policy cooperation among the group’s members. 

To this end, it will have to overcome geopolitical rifts to strengthen the dialogue between the G20’s various ‘clubs’, especially the advanced economies and their emerging-economy counterparts. 

Fortunately, South Africa is relatively well-positioned to do just that: Among Brics’s established members – Brazil, Russia, India, China, and South Africa – it boasts the least tense relations with the US and the European Union. 

But finding ways to bridge the divide between major powers is just the first step. 

South Africa will also have to engage the more recent additions to Brics (Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates), and ensure sure that the voice of the African Union – which became a permanent member of the G20 last year – is heard. 

By fostering more cohesion among developing countries, and delivering broader G20 cooperation, South Africa will raise its own profile within all of these ‘clubs’. 

The details of the agenda are crucial. 

It must be broad and ambitious, accounting for the priorities and aspirations of all G20 sub-groups, and it must include measurable commitments. 

There are several issues that can and should be considered, from easing the stranglehold of excessive debt to committing more resources to climate action. 

But one objective is indisputable: Economic growth.

THE ‘TEPID TWENTIES’

Achieving “strong, balanced, sustainable, and inclusive growth” has been the G20’s official overarching objective since 2009. 

And for good reason: Growth is critical to support poverty reduction, fair redistribution, debt sustainability, long-term investment in climate-change mitigation and the green transition, and social stability. 

But the 2020s are shaping up to be a decade of sluggish growth – what IMF managing director Kristalina Georgieva recently called the “tepid twenties”.  

The IMF estimates that global economic growth will reach 3.2% this year and 3.3% in 2025, and slow after that, resulting in an average real growth rate of 3.1% for the decade. 

That is low by historical standards – in the 2000s and 2010s, global growth averaged 3.9% and 3.7%, respectively – and implies slower convergence between high-income countries and their middle- and lower-income counterparts in the coming years. 

So, what will it take to boost growth in the medium term? 

Global aggregate demand must be supported (at a non-inflationary level). 

Resources, including labour, must be employed efficiently and sustainably. 

The global trading system must remain open and rules-based. And the international financial system must meet the need for both shorter-term adjustments and long-term investment. 

All of this will require a universally agreed multilateral policy framework.

To devise such a framework requires not only establishing clear policy priorities and identifying the most effective measures for achieving them, but also developing detailed institutional procedures for sharing information. 

Moreover, policy interventions must be sequenced properly, and take care to avoid negative externalities. 

‘HONEST BROKER’ 

With both developed and developing economies facing the prospect of sluggish growth in the medium term, the growth agenda is something on which everyone can agree. 

The focus on avoiding zero-sum policies – including negative spillovers from uncoordinated or even beggar-thy-neighbour measures – should help. 

In fact, a well-designed growth agenda, underpinned by a shared commitment to cooperation, can produce outcomes that no single country could achieve on its own. 

South Africa should play the role of ‘honest broker’ in this process. 

If it does its job right, it can restore the G20’s status as the premier forum for international policy cooperation and improve multilateral governance more broadly, including by ensuring that reforms to the international financial institutions remain on the agenda. 

Careful preparation for its presidency will be crucial for South Africa – and for the G20.

– Paola Subacchi is professor of political economy and incoming chair in Sovereign Debt and Finance at Sciences Po.

– Copyright: Project Syndicate, 2024