On June 9 and 10, 2021, the fifth meeting of the framework working group focused on the macroeconomic risks associated with climate change and on the relationship between digital transformation and productivity.
With just one month away from the meeting of G20 finance ministers and central bank governors, the activities of the G20 working groups are underway to provide a solid foundation for a sustainable and inclusive economic recovery. On June 9 and 10, 2021, members of the Framework Working Group (FWG) came together virtually for their fifth official meeting under the Italian Presidency of the G20.
The Framework Working Group monitors the evolving global economic outlook, while coordinating policies to support global economic growth and monitoring potential macroeconomic risks.
Discussions at the Group’s fifth meeting focused on macroeconomic risks arising from climate change and the relationship between digital transformation and productivity. In particular, this meeting offered the Italian Presidency of the G20 the opportunity to present the menu of policy options on digital transformation improving productivity.
In April, G20 finance ministers and central bank governors pledged to fight climate change and support environmental protection. They agreed on the urgent need to address environmental challenges and the unique opportunity offered by the relaunch to develop forward-looking strategies to invest in innovative technologies and promote the transition to more sustainable societies.
For the first time, this meeting allowed members of the G20 FWG to discuss the macroeconomic risks associated with climate change. The debate expanded from the economic costs of climate change and the progress made so far to addressing the importance of mitigating climate risks when shaping future policies.
While the impact of climate change on the global economy is fully recognized, it is far from homogeneous from one country to another. The IMF believes that a comprehensive set of policies can pave the way for net zero emissions by 2050 and limit global warming to less than 2oC, with world production in 2050 1.2% lower than the baseline projection. However, the IMF stressed that cost variation between countries should be taken into account.
Although the economic impacts of climate change are difficult to quantify, especially in the long term, the FWG strives to better include climate-related risk factors on a regular basis in discussions about monitoring global economic risks. In this context, the G20 will benefit from regular updates provided by International Organizations.
Recent studies show that the cost of decisive action to tackle short-term climate change is low compared to the potential future economic damage. To this end, one of the objectives of the FWG is to assess the evidence – within G20 countries – linking climate change to short, medium and long term economic damage.
Another central theme of the meeting of G20 ministers and governors in April was support for G20 economies. While economic stimulus packages will continue for as long as needed, ministers and governors agreed that economic support should evolve into more targeted measures, with an effective and prudent macroeconomic policy mix, subject to individual circumstances. country. The G20 unanimously agrees on the need to harness the opportunities arising from technological innovation to stimulate recovery and ensure widespread prosperity.
In this context, the Italian Presidency of the G20 presented to the members of the FWG the menu of G20 policy options on digital transformation improving productivity. This policy toolkit provides good practices for harnessing the opportunities offered by digitization, ensuring that they are shared within and between countries.
Digital technologies offer great potential to promote well-being and standard of living by improving the quality of products and services and increasing productivity. The COVID-19 pandemic has accelerated digital transformation and created new opportunities, enabling households, entrepreneurs and businesses to better cope with the pandemic. However, the diffusion of digital technologies is still incomplete and uneven across sectors and countries.
The crisis has also changed the way people work and consume. The need to reduce in-person interactions has boosted remote working and an emphasis on digitization and automation. Consumer spending has shifted from in-person services to digital services and durable goods. The use of online platforms, by both consumers and businesses, is growing at an unprecedented rate and, overall, digital businesses have been more resilient to the adverse effects of the crisis. Evidence indicates that these trends will continue and that adoption of the technology could be further accelerated.
In this sense, COVID-19 has triggered a strong political response from all G20 countries. Not only by helping businesses and households cope with the effects of the pandemic, but also by fostering the digitization of public and private sector activities, thus laying the foundations for future productivity growth. For many countries, this starts with efforts to bridge the digital divide through targeted training and retraining. In this context, support for investment in intangible assets is crucial, in addition to tax incentives for innovation and product market reforms.
The G20 policy options menu provides an overview of measures adopted by G20 countries in their efforts to boost productivity through digitization, including the policy response to the pandemic. It benefited from the contributions of the Organization for Economic Co-operation and Development, the International Monetary Fund, the International Labor Organization and the United Nations Conference on Trade and Development, as well as discussions held within of the G20 FWG.
All of the above issues will continue to advance over the coming months at FWG meetings and shape the agenda for the July meeting of G20 finance ministers and central bank governors in Venice.