Global economy has increasing likelihood of soft landing: G20
Downside risks include inflation remaining more persistent than expected, which leads to higher-for-longer interest rates, group says
By Ovunc Kutlu
ISTANBUL (AA) - There is an increasing likelihood of a soft landing by the global economy, although multiple challenges remain, G20 finance ministers said Friday.
Global inflation continues to come down from high levels due to well-calibrated monetary policies of central banks and the unwinding of supply shocks, the group said in a statement after the Third G20 Finance Ministers and Central Bank Governors Meeting held in Rio de Janeiro.
Central Banks remain strongly committed to achieving price stability in line with their respective mandates, and will continue to adjust their monetary policies in a manner that is dependent on incoming macroeconomic data, it added.
A soft landing is a situation when a central bank raises interest rates too much and too high, leading to an economic slowdown but avoiding a recession.
The group said economic activity has proved to be more resilient than expected in many parts of the world, but economic recovery has been highly uneven in countries, which contributes to the risk of economic divergence.
"We remain concerned that medium and long-term global growth prospects are below historical averages," said the statement. "We will continue to strive to reduce growth disparities across countries through structural reforms and measures."
The ministers said some of the upside risks to the global economic outlook include enhanced global cooperation, faster-than-expected disinflation and productivity boosts due to technological innovations, including the development and deployment of safe and responsible artificial intelligence (AI).
Downside risks, on the other hand, are wars and escalating conflicts, economic fragmentation and inflation remaining more persistent than expected, which leads to higher-for-longer interest rates.
Extreme weather events, excessive public and private indebtedness, limited financial buffers in the private sector of several countries, lower-than-expected productivity growth and the possible negative impacts of new technologies, including AI, are considered other downside risks.
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