Delegates convene during the second day of the G20 Finance Ministers and Central Bank Governors Meeting in Jakarta, Indonesia on Friday. POOL/AFP
The world’s biggest economies are committed to taking a careful approach to unwinding support introduced during the coronavirus pandemic, Indonesia said on February 18 at a meeting of Group of 20 (G20) finance chiefs.
Some central banks, including in the US, are moving towards hiking rates and withdrawing stimulus as economies rebound strongly from Covid-induced downturns and inflation surges.
But there are concerns that aggressive policy tightening could knock a fragile recovery off course, and send shockwaves through developing countries.
At the end of a two-day meeting of finance leaders from the G20 major economies in Jakarta, Indonesia’s central bank chief said the approach would be cautious.
“The G20 countries are committed to have well-calibrated, well-planned, and well-communicated normalisation policies,” Bank Indonesia governor Perry Warjiyo said.
“It’s important, so that these policies have a minimum impact on global financial markets, and on developing countries in terms of spillover effect.”
International Monetary Fund (IMF) chief, Kristalina Georgieva, said in a separate statement that “strong international cooperation and extraordinary policy agility will be crucial to navigate a complex ‘obstacle course’ through 2022”.
Indonesia currently hold the presidency of the G20, which brings together the world’s top economies, including China, the US and several European nations.
In its final communique, the G20 said that “supply disruptions, supply-demand mismatches, and increased commodity prices, including energy prices, have also contributed to rising inflationary pressures in a number of countries and pose potential risks to the global economic outlook”.
The group “will continue to strengthen the resilience of global supply chains. We remain vigilant of the impacts of these challenges on our economies”, the statement said.
The moves to tighten monetary policy are aimed at tamping down on inflation, which has been surging due to pandemic supply and logistics snags.
Inflation has been particularly pronounced in the US – which last month saw its largest annual jump in nearly four decades.
The meeting has been overshadowed by concerns that Russia may invade Ukraine, and the threat to the global recovery that conflict would bring.
Indonesian finance minister Sri Mulyani Indrawati said while specifics of the Ukraine crisis were not discussed at the talks, its potential impacts were.
“We understand that the geopolitical situation has spillover effects on [the] economy … and the prospect of economic recovery globally,” she said.
Without specifically mentioning the situation in Ukraine, the G20 said that it will “also continue to monitor major global risks, including from geopolitical tensions that are arising, and macroeconomic and financial vulnerabilities”.
The talks were originally due to take place on the resort island of Bali but were moved to Jakarta due to an Omicron virus wave.
Some leaders attended in person, while some took part via video link.
