Economic trends

Update from B20: getting global growth back on track

Could recommendations in new report by the B20 help kickstart the global economy?

The mood was sombre as finance ministers and business leaders comprising the Business 20 (B20) gathered in Ankara in Turkey this week to discuss how to remove impediments that have stalled global economic growth in 2015.

In short, we are back where we started at the beginning of the year. G20 policymakers are struggling to come up with a coherent response in the face of turmoil in emerging markets, centred on China’s economic performance, and anaemic conditions elsewhere in the world. The US economy of course remains a bright spot, but even here the bullishness is tempered by likely Federal Reserve tightening this month, or later in the year.

The taskforce’s B20 report notes that SMEs are major drivers of economic growth and employment. However, access to financing remains a major constraint for SME growth

Recognising that the building blocks for long-term economic growth cannot be fixed quickly, the B20 taskforce for financing growth (the taskforce) this year focused on two overarching themes:

  1. Facilitating financial inclusion with a focus on small and medium-sized enterprises
  2. Improving global financial regulation

The taskforce’s B20 report notes that SMEs are major drivers of economic growth and employment. However, access to financing remains a major constraint for SME growth. “One major reason is the lack of information. Transparent and reliable information on the financial performance of SMEs are hard to collect”, the report notes.

Along with establishing a World SME Forum (a previous recommendation from the B20), the report recommends the following actions to facilitate SME financing and improve the regulation of markets:

  • Make information on SME creditworthiness more available and reduce risk in SME financing. Improve the availability of SME creditworthiness by putting in place standard reporting rules, strengthening collection, storage and distribution of SME financial performance data, and fostering establishment of SME scoring and rating agencies
  • Broaden and deepen SME access to alternative financing. Offer alternative sources of finance to SMEs, including via crowdfunding, supply-chain financing, and private equity funding
  • Finalise and improve implementation of global financial regulatory reform agenda. This applies to the overall provision of financing provided by banks, not just to SMEs. The report calls on regulators to finalise implementation of the current agenda based on “careful and proportionate calibration”
  • Reiterate the need for regulatory consistency and improve process for consultation. The key here is giving greater consideration to the fact that emerging market economies are still developingglobal financial regulation

At the leader’s summit to be held in Antalya, Turkey, in November, G20 leaders will deliberate on core economic issues, including the findings and recommendations in the B20 report. Their overall objective will be to kickstart stalled global economic growth, to find the golden thread that creates a common purpose for the world’s major economies.

The G20 leaders have acted with strong resolve in the past, notably after the global financial crisis in 2009, but there is broad consensus that progress to help global growth has slowed in recent years. All eyes will be on Ankara this week and Antalya in November to see if the resolve has returned.