Global Corporations and Politics
Toward an Unknown ‘New Normal’: Building Fiscal Priorities in a Post-Pandemic World
List of speakers

On Friday, May 22, the Valdai Club held an online discussion titled “Coordinated Fiscal Stimulus 2.0: What the G20 Can Do to Counter the Global Economic Slowdown”, which was also a Global Table of the 2020 Digital Global Solutions Summit, one of the key events in the T20 process. The participants discussed the unique role that G20 can play in the creation of various crisis reaction and preventions mechanisms at the international level.

The coronavirus pandemic has forced governments all over the world to rethink their priorities in terms of fiscal spending. The discussion participants discussed whether these efforts can be coordinated, improving on the experience of concerted actions in the wake of the 2008-2009 financial crisis. According to Russian Deputy Finance Minister Timur Maksimov, the special guest of the event, G20 is the only global forum to develop international anti-crisis measures, which should be done in close interaction with international financial organizations such as the IMF and the World Bank. He specifically pointed to the need to provide debt relief to the poorer countries, although the issues of who should qualify and how to compensate for it later remain open. Addressing Russia’s situation, he said that the country’s long-term debt strategy has been to develop domestic financial markets that could finance government needs in their entirety. External borrowing was never supposed to play a significant role, which is not the case for many other emerging markets. 

Marc Uzan, Executive Director and founder of the Reinventing Bretton Woods Committee, said in his remarks that the current crisis is unprecedented in its scale and the number of areas it affected. What started as a global health crisis was aggravated by an economic crisis, leading to a social and, ultimately, financial crisis. The most dangerous thing about is that we do not know when it will end and, more importantly, what the new normal will look like. 

Philani Mthembu, Executive Director at the Institute for Global Dialogue in South Africa, focused on the need for regional coordination highlighted by the current crisis, pointing that it is crucial for Africa to build regional value chains to have more resilience on the continent. African Continental Free Trade Area has a special role to play as the development of intra-regional trade is seen as the main regional priority. At the same time, the crisis has demonstrated that Africa cannot go back to old type of society and will need to adjust for the post-pandemic reality, he stressed.

Hu Angang, Director of the Centre for China Studies at the Chinese Academy of Sciences and Tsinghua University, discussed China’s experience in dealing with the crisis, highlighting its pro-active fiscal policy and stimulating domestic consumption. As a result, China’s GDP growth rate will reach or exceed the potential growth level of around 6% in the second half of the year, so that the annual GDP growth rate will reach the bottom line of 2.0%, he said. Compared to the decreasing world GDP growth rate of minus 3%, this is the smallest economic loss, even though it is 3 to 4 percentage points less than the original target.

Ekaterina Arapova, Director of the Sanctions Policy Expertise Centre and Head of the Department for Academic Development at the Institute of International Studies in the Moscow-based MGIMO University, identified three challenges stemming from growing digitalization, which will continue to require maximum technological synergy rather than trade and economic synergy from international actors. In terms of infrastructure investment, preference should be given to development of critical digital infrastructure in developing countries to avoid growth of global inequality, she believes.  

Summing up the discussion, the moderator, Valdai Club Programme Director Yaroslav Lissovolik, said that it had demonstrated the scale of untapped potential for international cooperation, including at the inter-regional level, which should be considered in further G20 discussions.