Zacks Investment Management

Since 1999, leaders from 20 different economies, which account for approximately 85% of all global economic output, have assembled annually to promote strong, sustainable and balanced growth and to address pressing global, economic challenges. The 10^th edition of this summit was held in November 2015 in Anatolia, Turkey, with particular emphasis on decisive implementation of past commitments to propel investment-driven growth and promote inclusiveness.

What’s Happened So Far?

While great ideas and ambitious policies often emerge from G20 summits, only a fraction of these policies have actually been implemented by all member nations. Often times this is not a result of disingenuous rhetoric about desire to change and move forward, it’s more about political roadblocks that emerge once leaders return home. As a result, some of the hopefulness has been drained from these G20 summits.

Case in point: Two years ago, the G20 launched a $2 trillion plan to boost the world’s growth rate by 2% by increasing investments and restructuring economies to bolster productivity. However, the group has only been able to implement roughly half of the one thousand policies outlined during last year’s meeting, amounting to measures which are pegged to add around 0.7 percentage points to growth rates over the next five years. Again, good intentions don’t always result in achieving the vision.

What Was Discussed?

• Framing constructive fiscal policies: to bolster economic growth and job creation, leaders highlighted the need for implementing flexible fiscal policies in light of near-term economic factors.
• Implementing national growth strategies: to expedite the implementation of unfulfilled commitments made during the Brisbane G20 summit, leaders discussed adopting a robust monitoring framework as well as updated growth strategies.
• Fostering long-term investment-led development: to propose country-specific investment strategies which would help in improving the investment ecosystem, leaders discussed building quality infrastructure, supporting dynamism among small and medium enterprises and issuing guidelines pertaining to the seamless functioning of Public-Private Partnership (PPP) projects.
• Catalyzing inclusive global growth: to help generate more jobs and hone skills thereby boosting social cohesion, members devised a set of recommendations that would help generate global growth.
•  Addressing global youth unemployment: members addressed one of the most noteworthy challenges to economic equality worldwide – to reduce the share of unemployed youth by 15% by 2025.
• Fighting corruption more holistically: to help companies adhere to global anti-corruption protocols, leaders discussed enhancing transparency in both public and private sector via the implementation of G20 Open Data Principles.

The G20 also agreed on an international tax deal meant to curb tax avoidance by multinational corporations, a step that could help mitigate annual revenue erosion by an estimated $100-$240 billion. They also proposed to lay out plans to implement the G20 high level principles on Beneficial Ownership Transparency to help eliminate the abuse of anonymous shell companies. The strengthening of international cooperation to support asset recovery and deny safe haven to corrupt officials is a praise-worthy goal that is not only important but also much easier to implement than fiscal policy or outright investment.

Bottom-Line for Investors

The unfortunate truth is that G20 leaders have fallen woefully short of following-through on ambitious plans to create a unified front for global economic growth. But, the fact that they’re meeting and at least having discussions is a positive in and of itself. The discussions almost always optimistically focus on how major economies can coordinate macroeconomic policies in a manner that promotes trade, stimulates employment and boosts infrastructure. The aim is to lift collective GDP of the G20 nations by 2% over the next two fiscals, and that’s a good goal.

Disclosure