While it’s worth noting that G20 is a forum that is more focused on mutual economic development rather than political cooperation, as the war involves one of the G20 members, finding a peaceful solution is the key out of the current crisis. Moreover, the link between economic and political cooperation among countries is something that cannot be avoided.
Secondly, the importance of maintaining trade relations among countries in line with rising protectionism. In a more distant phase, inflationary pressures due to high commodity prices have prompted the world’s main commodities producers to secure the supply and price stability in their own countries, particularly food items. Of course, this can also hamper the global economic recovery from the pandemic. We have seen this being implemented. For example, Indonesia recently banned the export of palm oil, the raw material for cooking oil, in order to maintain supply and reduce cooking oil prices within the country. India has a short while ago has also issued a policy to ban the exports of wheat to maintain its supply and stabilize wheat prices domestically.
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Such policies will certainly hinder mutual economic recovery, so it is necessary to find a solution through the G20 forum to facilitate trade cooperation among countries. If not addressed immediately, rising protectionism in the midst of the increasing number and variety of global economic cooperation can make the situation worse because this kind of policies can potentially lead to other crisis, such as a food crisis in the wake of the unprecedented health crisis brought about by the Covid-19 pandemic.
A food crisis can happen because the goods prohibited from being traded with other countries are food commodities which a country’s trading partners are dependent on. Therefore, efforts to keep global trade flowing unhindered also need to be the focus of the G20 in formulating an effective mutual economic recovery strategy.
Thirdly, the need to maintain financial stability in the midst of global economic recovery efforts. Global financial stability is a prerequisite for economic recovery from the impact of the pandemic to continue. Moreover, in view of its history, the G20 forum was born out of a response to the 1997-1999 financial crisis in Southeast Asia, and since the 2008 global crisis, the forum has also involved the presence of leaders from the G20 countries.
This indicates that mutual economic recovery needs joint efforts to maintain financial stability. Moreover, in response to the pandemic that has occurred since the end of 2019, many countries have increased their debt to fund economic stimulus and contain the virus transmission. The increase in stimulus has the level of liquidity in the global economy rose quite rapidly, so stabilization efforts via tapering off by the central bank need to be carried out in stages and in a meticulously planned fashion.
Thus, the G20 forum is expected to offer solutions for efforts to maintain global financial stability amidst different responses by major central banks in dealing with rising inflation. Without concerted efforts to maintain financial stability, economic recovery can be derailed by high volatility in capital flows, exchange rate fluctuations, and interest rate wars to prevent capital outflows.