Saudi G20 gathering weighs coronavirus threat to global economy

RIYADH, Saudi Arabia – The deadly coronavirus epidemic will dent global growth, the International Monetary Fund (IMF) warned Saturday, February 22, as G20 finance ministers and central bank governors weighed its economic ripple effects at a two-day gathering in Riyadh.

The outbreak will shave about 0.1 percentage points from global growth and constrain China’s growth to 5.6% this year, IMF chief Kristalina Georgieva told luminaries from the leading 20 economies in the Saudi capital.

The gathering comes amid growing alarm over the new virus as Chinese authorities lock down millions of people to prevent its spread, with major knock-on effects economically.

The virus has now claimed 2,400 lives in China, cutting off transportation, disrupting trade, and fanning investor alarm as businesses are forced to close their doors. (READ: Chinese restaurants starved for cash as coronavirus hits industry)

“Global growth would be about 0.1 percentage points lower,” Georgieva said. 

“But we are also looking at more dire scenarios where the spread of the virus continues for longer and more globally, and the growth consequences are more protracted.”

At the meeting in Saudi Arabia, the first Arab nation to hold the G20 presidency, financial leaders also discussed money laundering, digital currencies, and ways to achieve a global taxation system for the digital era. 

But at the core of the discussions was an action plan to shield the world economy –already facing a slowdown – from the impact of the outbreak, said French Finance Minister Bruno Le Maire.

“The question remains open: whether it will be a V-shape with a quick recovery of the world economy or whether it would lead to a L-shape with a persistent slowdown in world growth,” Le Maire told reporters. 

“This is the key question.”

A senior US treasury official said Washington was “closely watching” the developments relating to the virus and assessing its effects.

China has said it will not be sending any leaders from Beijing for the Riyadh gathering, chaired by the kingdom’s finance minister Mohammed al-Jadaan and central bank governor Ahmed al-Kholifey.

But it said the Chinese ambassador in the kingdom will instead lead a small delegation.

‘Coordinated answer’

The G20 organizers also hosted a ministerial-level symposium on international taxation on Saturday, focused on the challenges arising from the digitalization of the global economy.

“There is a consensus among the G20 members on the necessity of getting this new international taxation system for the sake of fairness and efficiency,” said Le Maire.

He urged the gathered leaders to reach a compromise solution by the end of the year over the digital tax on giants such as Apple, Facebook, and Google, which has emerged as a key bone of contention between the United States and France.

Presidents Emmanuel Macron and Donald Trump have agreed to extend negotiations on the proposed French tax on digital giants to the end of the year, postponing Washington’s threat of sanctions against Paris.

France has said it would drop its tax if an international agreement is reached under the auspices of the Organisation for Economic Cooperation and Development (OECD).

The OECD says the tax changes under discussion could increase global corporate income tax revenues by some $100 billion (92 billion euros) annually.

“A coordinated answer is not the better way forward, but…the only way forward,” OECD chief Angel Gurria told the Riyadh gathering.

Last month, Britain said its own planned digital tax on hugely profitable technology giants will proceed from April despite US threats of retaliatory tariffs. 

“You cannot have in a global economy different national tax systems that conflict with each other,” US Treasury Secretary Steven Mnuchin said in Riyadh.

Even as France has put its plans on hold, other European nations like Italy and Austria have introduced their own digital levy.

Saudi Arabia’s G20 presidency will see it host world leaders for a summit in Riyadh from November 21 to 22.

It will hold more than 100 events and conferences in the run-up to the summit, including ministerial meetings, organizers say.

Human rights groups have urged G20 member states to exert pressure on the kingdom over its intensifying crackdown on dissent, which has seen women activists, journalists, and political dissidents jailed. – Rappler.com