March 18th, 2021
Today, Thursday March 18th, G20 Framework Working Group’s members met virtually, for their third official meeting under the Italian G20 Presidency, which offered an opportunity to make progress on some of the most pressing G20 agenda items. The meeting falls between the 1st G20 Finance Ministers and Central Bank Governors (FMCBG) meeting – which took place on February 26th – and the 2nd G20 FMCBG meeting scheduled for April 7th.
The February G20 FMCBG meeting acknowledged that health and economic conditions remain difficult, despite the launch of vaccination campaigns and the first signs of economic recovery. Ministers and Governors expressed their commitment to tackling current global challenges by adopting a stronger multilateral approach and focusing on a set of core priorities. These include an update of the G20 Action Plan, the main policy tool adopted by the group in 2020 to address and mitigate the impact of the Covid-19 pandemic.
In April, the G20 Membership will be asked to agree on the update at the 2nd G20 FMCBG official meeting, and the Framework Working Group represents the main G20 working level forum for analysis and discussion on how to keep the Action Plan fit for the purpose.
In this context, the Group discussed how to address new and pre-existing challenges, such as low productivity growth, rising inequality and climate and environment-related risks. Thanks to data and analyses provided by International Financial Organisations such as the IMF, the OECD and the ILO, the Group made an assessment of the latest economic and health outlook, taking stock of progresses made against existing Action Plan commitments.
This meeting was preceded by a G20 Framework Working Group’s seminar on “The monetary-fiscal policy-mix: measures for the recovery”. The seminar, held on Wednesday 10 March, featured a presentation by Professor Francesco Bianchi from Duke University, who shared the results of a decade-long research on the monetary-fiscal policy mix and the role of a well-announced coordinated strategy as a way out of negative junctures. Actually, separating the need for short-run stabilization from the issue of long-run fiscal sustainability may enable countries to run emergency budgets in support of their economies without compromising the commitment to budget sustainability and price stability. Resolving policy uncertainty at national level will be crucial to reducing financial vulnerabilities on international markets, avoiding negative spill-overs towards emerging economies.
Today’s discussion continued with an in-depth analysis of the benefits of online platforms for a strong, sustainable and inclusive recovery.
Last year’s lockdowns and the current crisis have shown that online platforms have become a key feature of digital transformation. Clearly, people and businesses are increasingly buying and selling goods and services via digital platforms. Furthermore, the public relies on such new virtual spaces for finding jobs, information, entertainment and several other purposes.
A dedicated report on this matter, presented by the OECD during the meeting, shows that in G20 economies online platforms experienced a three-fold increase between 2013 and 2019. The Covid-19 pandemic has further accelerated the use of some of these innovative platforms. Data collected from the OECD in the last decade indicate that digital platforms have generated large benefits and economic opportunities. In addition to strengthening shock resilience, online platforms can boost productivity growth. Moreover, the OECD analysis reveals that doubling online-platform activity has the potential to raise productivity growth by 2 percentage points in some sectors.
However, the current juncture has also shown that the capacity to shift towards online platforms has been highly heterogeneous across countries depending on their degree of digital preparedness. Hence, it is crucial to agree on a set of policy measures to ensure that this rapid transition towards a more digitalised economy will be as inclusive as possible, so that no one is left behind. In this sense, the OECD suggested a policy toolkit which includes: the definition of an institutional setting for a balanced diffusion of online platforms; solutions to narrow digital skill gaps, improve training opportunities and working conditions; norms to improve transparency and openness of online platform markets; and common standards for the collection of cross-country comparable data.
The IMF projects that greater automation and digitally delivered services are here to stay and insisted on the need for a policy framework capable of connecting economic growth and digitalization.
The economic downturn associated with Covid-19 can affect both within-firm productivity and the weight of different firms and sectors in the economy. In the paper presented at today’s meeting, the IMF indicates technology adoption, speed of reallocation and quality of labor as key issues to be taken into account for boosting the digitalization-productivity growth nexus.
Moreover, as suggested by the IMF, it is now time to gain a better understanding of how the Covid-19 crisis may affect productivity and how policies that support reallocation and investment in technology and intangible capital may be beneficial. It will also be crucial to map various needs in different contexts, including the re-skilling of labor and credit market support.
Issues concerning a new set of skills and the need to adapt labor conditions to a transformed work environment were the focus of a third and last presentation made by the International Labor Organization. The contribution stressed the need to adapt the norms regulating working conditions to make them suitable to a new digital work environment. The digital transformation must be matched by a cultural transformation aimed at creating more sustainable and inclusive societies.
The debate on how digitalization could fuel a rapid, strong, sustainable and inclusive economic recovery will continue in the coming months. The next steps in this area of work will be taken at the 2nd G20 FMCBG meeting at the beginning of April and the 4th Framework Working Group meeting on 29 of April 2021.