G20 performance on macroeconomic policy

Following a steady decline in macroeconomic decision-making, G20 leaders at their Bali Summit should aim to reverse this trend and increase the specificity of their commitments with targets and clear timetables

As the world seeks to restore economic growth against the many severe headwinds it currently confronts, macroeconomic policy is increasingly important for the G20’s role in global governance. Despite a strong performance in delivering on its macroeconomic policy commitments, there has been a steady decline in macroeconomic deliberation and decision-making. The current need for a robust global economic recovery calls for a stronger performance and increased leadership from G20 leaders at their Bali Summit.

Conclusions

Since 2008, the G20 has paid substantial attention to macroeconomic policy. It dedicated a total of 73,405 words to macroeconomics across all its summits, for an average of 4,588 words (34%) per summit. G20 deliberation on macroeconomic policy had an initial phase of increasing deliberation, followed by a second phase of decline. At Washington in 2008, the G20 dedicated 18% of the communiqué to macroeconomics. Its deliberation generally increased, to an all-time high of 54% at Brisbane in 2014. Then a decline started at Antalya in 2015 with 42%, and then 29% in 2016, 23% in 2017, 29% in 2018 and 22% in 2019. There was a slight increase to 34% at Riyadh in 2020, but this plunged to 20% at Rome in 2021.

Commitments

G20 decision-making on macroeconomics was generally strong, but also declined recently. The G20 has made a total of 491 collective, precise, future-oriented and politically binding commitments on macroeconomic policy. Macroeconomic policy accounts for 16% of the total of 3,017 commitments made at the past 16 summits. This puts macroeconomic policy first among all subjects. Decision-making increased from 6% of the commitments made in 2008 to a peak of 39% in 2012. From then it declined to 23% in 2013, 17% in 2014, 14% in 2015, 15% in 2016 and 8% in 2017. After a slight increase to 16% in 2018, it dropped further to 6% in 2019, 8% in 2020 and an all-time low of 3% at Rome in 2021.

Compliance

The G20 Research Group has assessed compliance with 33 of the 491 macroeconomic policy commitments made between 2008 and 2021. Average compliance was 81%. G20 delivery of its macroeconomic commitments was strong and stable, with only a few dips in performance. Compliance with the commitments made in 2008 was 88%, dropped to 68% for London in 2009, but climbed back up to more than 80% for Pittsburgh in 2009 and Toronto and Seoul in 2010. It dropped to 73% for Cannes in 2011, but rose above 80% again for Los Cabos in 2012 and St Petersburg in 2013. Compliance dropped to 70% for Brisbane in 2014, rose back to 85% for Antalya in 2015, dropped again to 69% for Hangzhou in 2016 and then soared to a very strong 90% for Hamburg in 2017. Compliance then remained strong at 85% for Buenos Aires in 2018, 89% for Osaka in 2019 and an all-time high of 95% for Riyadh in 2020. For the 2021 Rome Summit, compliance by June 2022 was already 83%. By member, the top complier in macroeconomic policy from 2008 to 2020 was Canada at 95%, followed closely by Germany at 93% and the European Union at 91%.

Causes and corrections

The G20’s strong performance on macroeconomic policy can be attributed to specific catalysts such as a timetable or target embedded in the commitment text. Of the 33 commitments assessed, 11 contained at least one catalyst. While the mere presence of a catalyst was not correlated with higher compliance, the presence of several specific catalysts seemed to give a boost. One commitment that referred to a ministerial meeting had 91% compliance, compared to an 81% average for commitments without this catalyst. A commitment with a specified target had 89% compliance, compared to 82% for those without. Commitments with a one-year timetable averaged 90% compared to 81% for those without. Commitments with a multi-year timetable averaged 92%, compared to 81% for those without.

At the Bali Summit, G20 leaders should aim to reverse the recent decreasing trend in deliberation and decision-making. They should also increase the specificity of their commitments by making sure their commitments contain targets, references to past ministerials, or one-year or multi-year timetables. These low-cost accountability measures can help reinforce the G20’s outstanding performance in members’ compliance with their macroeconomic policy commitments.