Medan, Indonesia – The G20, the world’s largest economic forum, is tasked with finding solutions to some of the thorniest issues facing the global economy.
This year, the list of challenges facing the club of major economies, whose flagship summit takes place Tuesday and Wednesday in Bali, is more daunting than usual.
Inflation in many countries is hitting 40-year highs, largely driven by soaring energy prices, as war in Ukraine and China’s zero-COVID policies disrupt supply chains. supply.
As central banks raise interest rates to rein in runaway prices, there are growing fears that the world will soon slip from a cost of living crisis into a global recession.
At the same time, the United States, China and other major economies face urgent calls for drastic action to avert a looming climate crisis.
Meanwhile, despite the summit’s optimistic slogan, “Recover Together, Recover Stronger,” prospects for cooperation at the first summit since the invasion of Ukraine look dim as the United States and its partners find themselves increasingly more at odds with China and Russia.
“The issue of inflation, which is immediate, and the longer term issue of having more sustainable development to reduce our carbon footprint require global coordination which is difficult in a much more fragmented world where geopolitical tensions are rising” , Trinh Nguyen, senior economist for emerging Asia at Natixis in Hong Kong, told Al Jazeera.
“The challenge for the G20, therefore, is to bring together geopolitically divergent leaders to find common ground and solutions to short- and long-term crises.”
Nguyen said inflation, above other issues, will be high on the agenda as it has “affected all households who find essentials more expensive for businesses.”
Nguyen added that another challenge for the G20 would be to forge a more integrated global supply chain that is less vulnerable to geopolitical shocks such as Russia’s invasion of Ukraine.
The International Monetary Fund (IMF) estimates that global inflation, which has risen steadily throughout the year, will reach 8.8% in 2022, from 4.7% in 2021, due to a combination of factors , including the COVID-19 pandemic, supply chain disruptions, the war in Ukraine and rising fuel prices.
The G20, which includes 19 countries and the European Union, has struggled to reach a consensus on the cost of living crisis, with finance ministers and central bank governors abandoning a planned statement in July that would have discussed inflation, world food and supply. shortages and anemic economic growth due to the discord over Ukraine.
Summit host Indonesia sought to maintain the neutrality of the forum, rejecting calls from Western countries and Ukraine to exclude Russia, and stressed the potential for cooperation on food and energy security.
In a newspaper interview last week, Indonesian President Joko Widodo lamented the possibility of geopolitical tensions overshadowing the summit, which he said is “not meant to be a political forum”.
At the G20 finance ministers meeting in Washington in April, representatives from the United States, United Kingdom and Canada walked out of a closed session when Russian delegates began speaking, and in July Russian Foreign Minister Sergey Lavrov stormed out of the G20 talks in Indonesia following criticism of Russia’s invasion of Ukraine.
Russian and Indonesian officials confirmed last week that Russian President Vladimir Putin would not attend the summit and would instead be represented by Lavrov. Putin is expected to attend at least one of the meetings virtually, however. US President Joe Biden and Chinese President Xi Jinping will both attend, with the two leaders due to have their first face-to-face meeting on Monday before the summit. Other high-level attendees include Indian Prime Minister Narendra Modi and Japanese Prime Minister Fumio Kishida.
Radityo Dharmaputra, senior lecturer in international relations at Airlangga University in Surabaya, Indonesia, said the main challenge of the summit will be to find a way to encourage positive movement in Russia-Ukraine relations.
“Indonesia only invited the two presidents without making any proposals,” Dharmaputra told Al Jazeera.
He said Russia likely viewed the invitation to attend the summit as a trap since Putin’s attendance would likely have been boycotted by Western leaders.
In June, Widodo traveled to Ukraine and Russia in a diplomatic effort to broker peace talks and once again allow free passage for grain exports.
The following month, Russia, Ukraine and Turkey signed the United Nations-brokered Black Sea Grains Initiative, aimed at ensuring the safe transport of grain and other foodstuffs from ports. Ukrainians.
“At the moment, Indonesia only wants to build trust, but that will be next to impossible during the war,” Dharmaputra said.
“Apparently, Indonesia is continuing the ASEAN way of building trust with informal meetings, meals, golf and coffee. But it’s very difficult to make it work also for a very different conflict and cultural background.
Shahar Hameiri, a political economist at the University of Queensland, said energy would be an important focus of the summit because the war in Ukraine had highlighted the power of energy-producing countries to influence prices for all others.
“Some of them are members of the G20, including of course Russia itself, but also Saudi Arabia and Indonesia,” Hameiri told Al Jazeera.
“The United States was outraged when so many producing countries failed to increase production to keep prices high, in apparent support of Russia.”
Hameiri said another important issue he expects the G20 to discuss is debt restructuring for developing countries facing financial difficulties.
“The G20 has been trying to coordinate this for some time, but the scale of the debt problem has gotten so much worse recently as the US Federal Reserve raised interest rates to tackle domestic inflation,” he said. he declared.
Despite the scale of the challenges and the political discord, some observers see room for optimism about the G20’s ability to tackle common problems.
Dandy Rafitrandi, an economics researcher at the Center for Strategic and International Studies, said the forum had made achievements in recent years, including initiatives to suspend debt payments to the poorest countries and provide financing to countries facing urgent cash shortages during the pandemic.
“The G20 Finance Track discussed several follow-up initiatives from the previous presidency such as the Debt Service Suspension Initiative (DSSI) and Special Drawing Rights (SDRs), which aim to protect vulnerable developing countries macroeconomic pressures in the face of COVID-19 and rising food and energy prices,” Rafitrandi told Al Jazeera.
“However, the legacy of this year’s G20 Indonesia will be the successful establishment of the Pandemic Prevention, Preparedness and Response Financial Intermediate Fund (PPR FIF), which will be managed by the World Bank in collaboration with the Organization World Health Organization (WHO),” Rafitrandi said, referring to an initiative to help low- and middle-income countries build pandemic preparedness.
“Amidst heightened geopolitical tensions, this achievement should be appreciated.”