A global stress test
G20 Summit

A global stress test

In the face of today’s challenges – and with the rules-based international order and global trading system under significant stress – the world needs more multilateralism, not less

The rules-based international order and the rules-based global trading system, which have underpinned growth, development and increases in living standards around the world for many decades, are under significant pressure.

Our latest Economic Outlook shows that the global economy has begun to recover, but it is a recovery to comparatively low growth, with risks tilted to the downside. We estimate that global growth will reach 2.7% in 2023, the lowest of any year since the 2008 global financial crisis except 2020. Inflation remains too high and is not coming down fast enough. There are significant uncertainties related to Russia’s continuing war of aggression against Ukraine and geopolitical tensions more generally. And a range of long-standing and increasingly urgent structural challenges – related to climate change, the accelerating digital transformation and population ageing – remain.

The G20 can and must do more. It has and must continue to find the best possible solutions to the evolving challenges of our time.

It has to do so to optimise the strength and the quality of future economic development and growth. To boost productivity, including through reforms promoting competition, reviving investment, increasing female workforce participation and alleviating supply constraints. To tackle the debt distress or high risk of debt distress that over half of low-income economies are experiencing. To address the massive gap between current levels of infrastructure investment and global needs. To manage the economic and social challenges associated with the green and digital transformations of our economies. And it has to help ensure global markets function well, based on a rules-based system in good working order.

The Organisation for Economic Co-operation and Development has been working closely across this range of policy issues with India’s G20 presidency, G20 members and international organisations. I highlight here three areas: the Sustainable Development Goals, taxation and corporate governance.

The SDGs, through their breadth and ambition, are critical drivers of progress. But the United Nations’ preliminary assessment of roughly 140 targets shows that only 12% are on track and 30% have either seen no movement or regressed below the 2015 baseline. Without additional efforts, 575 million people will still live in extreme poverty by 2030, and only about one-third of countries will meet the target to halve national poverty levels. So the OECD has partnered with the UN to help update the G20 Plan to Accelerate Progress on the Sustainable Development Goals. We are helping anchor the Indian G20 presidency’s Lifestyle for Sustainable Development approach in our OECD frameworks, including the Green Growth Indicators and Better Life Index.

A tailored plan

At this year’s summit in New Delhi, the OECD will deliver a tailored plan of action to help developing countries implement the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy – building on our strong track record of working together, and to strengthen that cooperation even further. Developing countries have played a critical role in the development and design of the Two-Pillar Solution, making our international tax arrangements fairer and work better in an increasingly digitalised and globalised world economy. A key mission now is to ensure countries are in the best position to administer and enforce these rules effectively to realise the full potential of the new rules, by ensuring appropriate access to the country-by-country reports they need, by further ramping up the highly successful Tax Inspectors Without Borders initiative in partnership with the UN Development Programme and by ramping up our capacity-building efforts.

The revised G20-OECD Principles of Corporate Governance will also be submitted for consideration by G20 leaders at New Delhi. The revisions reflect a strong desire from all OECD and G20 members to see the principles offer guidance on companies’ sustainability and resilience. In particular, the revised principles will help companies manage environmental and social risks, with insights on disclosure and the roles and rights of shareholders as well as stakeholders and the responsibilities of company boards. This will, in turn, improve companies’ access to financial markets in an environment where investor expectations are evolving.

In the face of today’s challenges – in the short, medium and long term – the world needs more international cooperation. We need more multilateralism, not less. The OECD as always stands ready to be a very active and constructive partner in this mission.