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Daniele Franco, Italy's Minister of Economy and Finance, stumbles after his speech during a press conference on Friday at the G20 finance ministers and central bankers meeting in Venice. Global tax reform is at the top of the agenda as the world's biggest economies seek to ensure multinational companies pay their fair share. Photo: AFP

G20 to warn of risks of coronavirus variants amid ‘great divergences’ in global economic recovery

  • A Group of 20 draft statement indicates policymakers are not ready to give the all-clear signal on the pandemic due to Delta and other variants
  • The statement also includes a pledge ‘to use all available policy tools for as long as required to address the adverse consequences of Covid-19’

Finance ministers and central bankers from the world’s biggest economies plan to warn of persistent risks to global growth from coronavirus variants even as the overall outlook brightens, according to a draft communique seen by Bloomberg News.

Since April, “the global outlook has further improved, mainly due to the roll-out of vaccines and continued policy support”, according to a draft of the Group of 20’s statement, scheduled to be released on Saturday in Venice, where policymakers are meeting.

“However, the recovery is characterised by great divergences across and within countries and remains exposed to downside risks, in particular the spread of new variants of the Covid-19 virus and different paces of vaccination.”

The document, which may be subject to revision, indicates policymakers are far from ready to give the all-clear signal on the pandemic, with the Delta variant causing a resurgence in Covid-19 cases in many nations.

While the United States and Europe are enjoying strong recoveries as vaccinations spread, other places are lagging behind and suffering, such as India and South Africa.

The draft statement includes a pledge, similar to the group’s prior communique in April, “to use all available policy tools for as long as required to address the adverse consequences of Covid-19” and to avoid any “premature withdrawal of support measures”.

How to secure a fairer tax deal for the world, not just rich countries

It contains no explicit reference to the jump in US inflation, other than a nod to central banks remaining consistent with their mandates for price stability.

The G20 is also set to endorse the global tax overhaul accord reached by 131 countries this month through the Organisation for Economic Cooperation and Development. The draft statement calls for nations to address remaining details and come up with an implementation plan by October.

Finance ministers will also express support for the International Monetary Fund’s plan to create $650 billion (HK$5.04 trillion) of new reserves while calling on the fund to “quickly present actionable options” for wealthier nations to direct their portion of the funds to needier countries, according to the draft communique.

On climate issues, the G20 is set for the first time to recognise the role of carbon pricing as part of efforts to tackle climate change.

The draft communique says a variety of tools should be used to deal with the issue, ranging from investing in sustainable infrastructure to phasing out fossil-fuel subsidies, and “if appropriate, the use of carbon pricing mechanisms and incentives, while providing targeted support for the poorest and the most vulnerable”.

The statement omits any mention of a climate pledge to achieve net zero greenhouse gas emissions by 2050. A push by European nations to include the language in the G20’s communique was thwarted by several countries that are more reliant on fossil fuels, according to the people familiar with the matter, who asked not to be named because the discussions are private.