World expects G20 summit to push for more inclusive economy

Updated 2017-07-06 10:33:31 Xinhua

World leaders are expected to meet at an annual G20 summit held in Hamburg, Germany on the weekend, discussing issues such as economic growth, international trade and financial market regulations.[Special coverage]

The event, scheduled for July 7-8, is a major platform for global governance, during which heads of state and government are expected to send a clear message for shaping a strong, sustainable and inclusive world economy.

LONG-AWAITED RECOVERY

The world economic recovery has gained momentum since last summer, with many countries witnessing a boost in investment, manufacturing and trade.

The International Monetary Fund (IMF) therefore updated its expectation of the world economic growth to 3.5 percent for 2017 and 3.6 percent for the next year.

The World Bank predicted that the world economy will grow 2.7 percent this year and 2.9 percent next year, both higher than the 2.4-percent growth in 2016.

However, economists pointed out that the current recovery is not strong, and the downside risks including structural problems and rising protectionism still cloud the medium-term outlook.

The world economic growth rate will remain likely below the pre-crisis levels, Christian Dreger, director of International Economic in German Institute for Economic Research, told Xinhua.

He stressed that low productivity growth and rising income inequality in many countries added fragility to the recovery.

The IMF and the World Bank have the same concerns. The two institutions warned that the recovery would be challenged by policies of the United States and Europe, rising protectionism as well as tightening monetary policy in developed countries.

Dirk Messner, director of German Development Institute, said it is hard to find a solution at the G20 Hamburg Summit, "but hopefully it will be a step to build new, broad and stable alliances to shape the era of the global economy towards sustainability and inclusiveness."

IMF Managing Director Christine Lagarde also called for more cross-border cooperation to strengthen the world economic growth.

STRUCTURAL REFORMS

During the summit held in Hangzhou, China, last year, world leaders agreed on G20 Enhanced Structural Reform Agenda (ESRA), which identified nine areas as the priorities of the G20 structural reform.

In order to achieve long-term growth and stronger recovery, Dreger said, structural reforms must be implemented, especially in developed countries.

Maurice Obstfeld, an IMF advisor, said a clear threat to world economic growth is a turn towards protectionism, which may lead to trade disputes.

He pointed out that the slow economic growth and structural labor market disruptions, mainly in advanced economies, have generated political support for zero-sum policy approaches that could undermine international trading relationships, along with multilateral cooperation more generally.

The Organization for Economic Cooperation and Development (OECD) said in its first Technical Report on Progress on Structural Reform Under the G20 ESRA that across the G20 reform intensity is at around pre-crisis levels and there seems to be less progress on reforming the tax structures or public spending efficiency.

The IMF highlighted structural reforms, especially in developed countries, are aimed at tackling lower productivity growth, poor employment performance and rising income gaps.

FREE TRADE

The G20 Hamburg Summit comes at a time when globalization seems stalled and free trade is under threat.

Over the past few decades, the notion that trade promotes prosperity worldwide was accepted by most countries. The free flow of goods, capital, services and human resources has helped hundreds of millions of people move out of poverty.

As protectionism rises in several countries, defending free trade has become a top priority on the G20 agenda.

Representing the G20 business community, the B20 has stressed that free trade is crucial for a resilient and inclusive global economy by boosting growth, employment, welfare, purchasing power and productivity.

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