G20 Financial Leaders Tout 'Soft Landing' but Warn of Global Risks

G20 financial leaders highlight an increased likelihood of a global economic 'soft landing,' but warn that wars and escalating conflicts can jeopardize this outlook. The joint communique from their meeting in Brazil addresses economic resilience, risks, and the need for IMF reforms, while flagging climate change as a significant concern.

G20 financial leaders will announce on Friday a growing chance of a global economic 'soft landing.' However, they will caution that wars and escalating conflicts might threaten this outlook, according to the final draft of a joint communique seen by Reuters.

The statement will be released as finance ministers and central bankers from the Group of 20 major economies conclude their meetings in Brazil. Under its presidency, Brazil has focused on reducing economic inequalities. The World Bank has forecasted that the global economy would avoid a third consecutive decline in growth, stabilizing at 2.6% in 2024, but will remain below pre-pandemic levels through 2026.

The final draft, to be formally adopted on Friday, said, 'We are encouraged by the increasing likelihood of a soft landing of the global economy, although multiple challenges remain. Downside risks include wars and escalating conflicts.' By omitting explicit mentions of Ukraine and Gaza, diplomats aim to avoid disputes between Russia and Western nations.

To resolve the disagreements, Brazil drafted a chair statement on geopolitical issues, noting that these subjects will be tackled at the G20 leaders' meeting in November. 'Economic activity has been more resilient than anticipated in many regions, but the recovery has been uneven, increasing the risk of economic divergence,' the draft noted.

The document highlighted balanced economic risks, including faster-than-expected disinflation and technological advancements, alongside threats like AI, economic fragmentation, persistent inflation, and extreme weather events. It stressed that poorer nations bearing the brunt of climate costs would worsen global economic inequality. 'The cost of inaction is greater than the cost of action,' the communique reiterated.

The document also called for IMF reforms, urging a realignment in quota shares to better reflect members' economic positions. Additionally, it renewed calls to resist protectionism, emphasizing its importance in a standalone paragraph.

(With inputs from agencies.)