– Secretary of the Treasury Janet L. Yellen at Press Conference Ahead of the G20 Finance Ministers and Central Bank Governors Meetings in São Paulo, Brazil
- The global economy
First, I look forward to discussions about the state of the global economy and how we can further strengthen it. Over the past year, global growth has been resilient and stronger than predicted. The IMF and other forecasters projected that there would be a broad-based slowdown in the global economy in 2023. That didn’t happen. Global growth came in at 3.1 percent, exceeding expectations. Inflation has fallen and is expected to continue to fall this year in about 80 percent of economies. Going forward, we remain cognizant of the risks facing the global outlook and continue to carefully monitor the economic challenges in certain countries, but the global economy remains resilient.
The strength of the US economy has been a key driver of this positive economic performance. The Biden administration’s policies, starting with the American Rescue Plan and continuing with historic investments in infrastructure, clean energy, and manufacturing have led to strong US GDP growth. Inflation has come down significantly from its peak. The US labor market is also historically strong. Prime-age labor force participation is above its pre-pandemic level and the unemployment rate is near historic lows.
Had a US recession come in 2023, like many predicted, global growth would have been thrown off track. While there are risks to our outlook, America’s growth has consistently exceeded projections. In short, America’s path to a soft landing has underpinned global growth. Momentum in many economies, including growth in Brazil, has also contributed, while other economies continue to face challenges.
- II. The International Financial Architecture
The actions we’ve taken through forums like the G20 have helped strengthen the underpinnings of the global economy and position us to make further progress combatting challenges. I believe that the results we’ve seen over the past few years and the foundations we’re laying for the long-term are also a testament to how strong US leadership can benefit both Americans and the world.
From the beginning of this administration, president Biden has made clear that American isolationism was over for a simple reason: retreating from the world hurt Americans at home and undermined the values we share with our partners and allies. We set forth a new principle: that America is strongest when we engage with the world. Multilateral action advances America’s own economic security and prosperity. And it’ll lead to better outcomes for people in America and around the world. I’ve taken this vision forward as Treasury Secretary.
Let me highlight three areas of relevant work that we’ll advance this week.
First, the Biden administration remains committed to deepening ties with emerging market economies. As Treasury Secretary, I’ve traveled to India, Indonesia, Mexico, South Africa, and Vietnam, and led work on building resilient supply chains and driving investment in high-quality, sustainable economic growth. The US has already mobilized more than $30 billion for the Partnership for Global Infrastructure and Investment, which we launched with our G7 counterparts with the target of mobilizing $600 billion for global infrastructure investments over five years. Through the Just Energy Transition Partnerships, we’re directing public and private finance to support emerging markets’ climate and policy reform agendas.
We will also further Brazil’s priorities for its G20 Presidency throughout this year, including its focus on addressing inequality and poverty, which aligns with our work at home to reach people and places that have been too often left behind. We support Brazil’s plans to provide a forum for African countries to shape the conversation on debt and its commitment to improving the climate finance architecture. The US had a similarly strong partnership with Indonesia and India throughout their host years and we look forward to key work continuing as South Africa and then the US each assume the G20 presidency in the next two years.
Second, we seek to collectively address the global challenges of pandemics, climate change, and conflict and fragility. We showed that multilateral efforts can lead to quick progress early on with the creation of the Pandemic Fund. The Pandemic Fund raised nearly $2 billion from 25 donors, including contributions from many G20 partners, in the first year following launch. Funding went to projects across 37 countries in the first call for proposals and the second call is well underway.
We’re also pursuing ongoing work to evolve the multilateral development banks. Since I first called for MDB evolution in October of 2022, we have built a broad coalition aligned around a common vision; unlocked an initial $200 billion in new MDB lending capacity over the coming decade; and supported leaders across the MDBs who are pursuing bold innovations, including president Banga at the World Bank. I am glad that Brazil has made the MDBs central to its Presidency. And, I look forward to continuing our collective work on further efforts to increase the MDBs’ financial capacity, get the MDBs to work better as a system, and increase mobilization of private capital to support emerging and developing markets. I’m also glad that the US helped lead the effort for a significant capital increase for IDB Invest that should be approved next month.
Third, the strength of the global economy is underpinned by our work to fortify the international financial architecture. The United States led efforts to align 145 countries on a global minimum tax. While more action is needed at home and abroad, this historic deal is now being implemented in jurisdictions around the world and will help end what has been a race to the bottom on corporate taxation. We’ve added to the IMF toolkit, creating the Resilience and Sustainability Trust to provide long-term financing for climate and health investments and the food shock window to combat the devastating rise in food insecurity from Russia’s war on Ukraine. Last year, we also reached agreement on a 50 percent quota increase that will ensure the IMF has the necessary resources to play its crucial crisis response role.
These successes provide a strong foundation for further multilateral action that will continue to benefit America and countries around the world.
- III. Ongoing Conflicts
I’d like to end by addressing Russia’s invasion of Ukraine and the conflict in the Middle East. The United States has been guided by our commitment to protecting the foundational principles that underlie the international system and the global economy.
In the almost exactly two years since Russia’s invasion of Ukraine, this brutal and unjust war has had a devastating human cost, as I saw firsthand when I visited Kyiv one year ago after the first anniversary of the invasion. It has also caused economic harm around the world. To advance our values and protect the global economy, the US and a strong global coalition has supported Ukraine with military, security, humanitarian, and economic assistance while working tirelessly to deprive Russia of the funding and military equipment it needs to fuel its aggression.
Our novel price cap policy has significantly reduced Russian revenue while keeping global energy markets well-supplied. We developed an unprecedented multilateral sanctions regime and continue to take actions to crack down on sanctions evasion, such as president Biden’s Executive Order just last December authorizing sanctions on foreign financial institutions that facilitate certain transactions or services involving Russia’s military-industrial base.
When Russia invaded, the price of oil spiked to over $120 per barrel – a devastating shock for emerging market and lower-income importing countries. Since implementing the price cap, these countries have benefitted from increased stability and lower prices.
We’re continuing to take action to address other challenges for emerging markets stemming from the invasion as well, such as food insecurity. In December, we announced the leading pledge to the replenishment of the International Fund for Agriculture and Development, which will continue allocating 100 percent of its core resources to low-income and lower-middle-income countries and will now scale up its climate finance target and private sector engagement. Of course, additional action is needed to combat food insecurity and other challenges.
As we enter the third year of Putin’s war of choice, president Biden and I are committed to doing more alongside our allies and partners. I applaud EU members reaching agreement on 50 billion euros for Ukraine. At home in the US, the Senate passed the national security supplemental with strong bipartisan support. The House of Representatives must now act to maintain budget support for Ukraine to enable Ukraine’s continued heroic resistance and to protect our national security interests and the values we and our allies and partners all share.
We should be clear: When Putin first invaded Ukraine, he believed he could take over easily. He failed for two reasons. First, due to the strength, commitment, and resilience of the Ukrainian people. And second, due to the efforts and resources of the broad global coalition that has stood with Ukraine.
This week, G7 leaders announced additional coordinated sanctions to degrade Russia’s war machine, and we will continue to take action to restrict Russia’s access to the materials and money it needs to continue the war. But now Putin’s strategy is hoping he can simply wait out Ukraine and its allies. We must prove him wrong and show the Kremlin that we will collectively stand with Ukraine for as long as it takes.
Our coalition, representing more than half of the global economy, took action to immobilize $285 billion in Russia sovereign assets and jointly affirmed this money will remain frozen until Russia pays for the immense damage it has caused. My European colleagues have now taken an important first step to harness windfall proceeds from Russian sovereign assets, an action I fully endorse.
I also believe it is necessary and urgent for our coalition to find a way to unlock the value of these immobilized assets to support Ukraine’s continued resistance and long-term reconstruction. While we should act together and in a considered way, I believe there is a strong international law, economic, and moral case for moving forward. This would be a decisive response to Russia’s unprecedented threat to global stability. It would make clear that Russia cannot win by prolonging the war and would incentivize it to come to the table to negotiate a just peace with Ukraine.
Since this past October, our commitment to protecting the global economy has also shaped our actions in response to the conflict in the Middle East. We have not seen a significant impact on the global economy, but we continue to monitor this closely. We have led efforts to counter the financing of Hamas and acted decisively in response to the Houthi attacks in the Red Sea, launching Operation Poseidon Archer and coordinating with our allies to sanction leaders and supporters of multiple terrorist actors, including Hamas, the Houthis, and other Iranian proxies. The global economy cannot be undermined by terrorism.
We have also acted in response to the conflict’s devastating human impact, including working with the humanitarian sector to help assist innocent Palestinians and get legitimate aid to where it is most needed. We continue to explore options for strengthening the West Bank economy following president Biden’s Executive Order earlier this month. The United States has urged the Israeli government to release clearance revenue to the Palestinian Authority to fund basic services and to bolster the economy in the West Bank. I welcome news that an agreement has been reached and funds have started to flow. This must continue. I also recently outlined in a letter to prime minister Netanyahu a number of steps that the United States believes must be taken, including reinstating work permits for Palestinians and reducing barriers to commerce within the West Bank. These actions are vital for the economic well-being of Palestinians and Israelis alike.
And, we support the World Bank’s commitments to emergency food security assistance in Gaza and economic support for the West Bank, and the ongoing MDB and IMF programs in Egypt and Jordan.
On all these fronts, the United States will continue to work with our allies and partners. We have come up against historic challenges in recent years, but we’ve also made significant progress to put the global economy and the multilateral system on better footing. I am optimistic about the impact that strong US engagement will continue to have as we navigate the challenges ahead, and I look forward to a productive G20 meeting.
