Health and Science

Coronavirus poses risk to modest pickup in global growth, G-20 draft communique says

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Key Points
  • G-20 finance ministers and central bank governors meet on Saturday and Sunday in Riyadh to discuss the global economy.
  • The draft also includes a political endorsement of global tax rules proposed by the G-20's economic think tank.
  • The rules would affect digital companies such as Alphabet's Google, Facebook, Amazon, Apple or Alibaba.
A worker at a factory in Nanjing sorting face masks being produced to satisfy increased demand during China's COVID-19 coronavirus outbreak, in China's Jiangsu province.
Stringer | AFP | Getty Images

Financial leaders of the world's 20 largest economies (G-20) expect a modest pickup of global growth this year and next, but see the coronavirus epidemic as a downside risk, a draft communique prepared for the meeting on Feb. 22-23 said.

G-20 finance ministers and central bank governors meet on Saturday and Sunday in Riyadh to discuss the global economy, as China grapples with a virus that has killed more than 2,000 people and forced drastic curbs on travel and commerce.

"After signs of stabilization at the end of 2019, global economic growth is expected to pick up modestly in 2020 and 2021. The recovery is supported by the continuation of accommodating financial conditions and some signs of easing trade tensions," the draft, seen by Reuters, said.

"However, global economic growth remains slow and downside risks to the outlook persist, including those arising from the impact of the novel coronavirus outbreak, geopolitical tensions and policy uncertainty," said the draft, which may still be changed before the final version is adopted on Sunday.

The financial leaders will endorse G-20 summit conclusions from last year that they would strive for a "free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment", and keep their markets open.

This is a new boilerplate G-20 statement on trade, after policies of the U.S. Trump administration, triggering trade conflicts with China and the European Union and a paralysis of the World Trade Organisation, put an end to previously used phrases about rejecting protectionism, promoting global trade and strengthening the WTO that were standard under the Chinese G-20 presidency in 2016.

The draft also said the ministers and central bankers will stand by earlier statements that flexible exchange rates, where feasible, can serve as a shock absorbed, and that excessive volatility or disorderly movements in exchange rates can have adverse implications for economic and financial stability.

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The G-20 will say the members will refrain from competitive devaluations, and will not target exchange rates for competitive purposes, the draft showed.

The draft also includes a political endorsement of global tax rules proposed by the Organization for Economic Cooperation and Development (OECD), the G-20's economic think tank. The rules would affect digital companies such as Alphabet's Google, Facebook, Amazon, Apple or Alibaba.

This is an issue that many G-20 countries care deeply about, officials said, but it has been stalled by the reluctance of Washington to agree to a global standard of taxing internet firms, most of which are U.S.-based, before U.S. presidential elections later this year.

At stake is the push to tax revenues of internet giants in the country where they do business, rather than where they register their subsidiary for tax purposes. The OECD calls this tax-where-you-sell approach Pillar One.

Equally important is the minimum effective tax rate at which the internet firms are to be taxed -- in OECD jargon adopted by the G-20 called Pillar Two.

The G-20 will call for finding a technical deal to tax internet firms by July and a political agreement among the G-20 by the end of the year, the communique said.

"We endorse the outline of the architecture of a unified approach on Pillar One as the basis for negotiations and welcome the Progress Note on Pillar Two," the draft communique said.

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