Sydney, 24/02/2014 (Agence Europe) - On 23 February, the G20 countries set a target in Sydney to increase global growth by a further 2% by 2018 compared with forecasts.
“We will develop ambitious but realistic policies with the aim to lift our collective GDP by more than 2% above the trajectory implied by current policies over the coming 5 years”, say the finance ministers and central bank governors in a press release. This is the first time that the G20 has set itself a precise target in this area, and Germany and India were reluctant to do so. The IMF forecasts global growth of 3.7% in 2014 and 3.9% in 2015.
For Australia's Treasurer Joe Hockey, achieving such an objective would enable tens of millions of additional jobs to be created and an extra US$2 trillion (€1.45 trillion) in activity in real terms. According to IMF Managing Director Christine Lagarde, this figure would be around US$2.25 trillion. In order to reach this growth, the G20 has committed to taking “concrete actions”, including through investment, and stimulating trade and competition. “There is no room for complacency. Each country will play a significant part in achieving our common target. We know reform is hard. We have to earn economic growth and jobs”, said Hockey. All these actions will serve as the basis for the action plan of the G20 summit in Brisbane (14-15 November).
An end to complacency. Lagarde believed this target was “attainable”, while France's Minister for the Economy Pierre Moscovici believed it was “very ambitious but also very realistic”. “It's useful but, of course, this must be supported by structural reforms and macroeconomic policies”, said European Commissioner for Economic and Monetary Affairs Olli Rehn. Germany's Minister for Finance Wolfgang Schaüble was more sober. “The rates of growth likely to be achieved result from a very complex process”, he said, adding that “the result of this process [could] not be guaranteed by political leaders”.
Volatility. The G20 reiterated the importance of the central banks taking account of the impact of their policies elsewhere in the world, while the US Federal Reserve's gradual change of direction on its accommodative monetary policy has caused turbulence in several emerging countries. “All our central banks maintain their commitment that monetary policy settings will continue to be carefully calibrated and clearly communicated, in the context of ongoing exchange of information and being mindful of impacts on the global economy”, says the G20 press release.
“We are committed to developing cooperation and communication between countries”, said Australia's minister for the economy and finance. “The central banks of the advanced countries must pursue the objectives of their domestic mandate but they also intend to take into account the spillover effect on other countries and to consider this in their mandate because these effects can have effects on their economy”, said Governor of the Bank of France Christian Noyer, stating that the central banks of advanced countries will be as visible and transparent as possible and that the banks will hold more discussions so that countries may be taken less by surprise and prepare for their adjustment. He added that the emerging countries should strengthen their resilience. “In some circumstances, the effects can be over and above the intended effects and, in this case, the IMF must be ready to guarantee that there will not be any countries swept away by speculative capital flows”, he added.
While Indonesia and South Africa asked the Fed, before the G20, to communicate better on its monetary policy, the US, the UK and IMF called on the emerging countries to accelerate economic reforms.
The ministers also reviewed reform of the financial architecture in response to the financial crisis. They highlighted the importance of implementing agreed measures such as the management of derivatives markets. “Financial regulation remains a priority and work must not be stopped. It's extremely dangerous to think that it can be slowed down. Adaptation is needed permanently”, Moscovici warned.
Emphasis on investment. Over dinner on 22 February, the G20 also committed to facilitating investment. “We are committed to creating a climate that facilitates higher investment, particularly in infrastructure and small and medium enterprises”, the press release states. According to sources, AU$67-90 trillion of investment would be needed by 2030 in sectors such as transport or energy. In April, the ministers will discuss in Washington how to maximise the impact of public sector capital expenditure and how to enhance the catalytic role of multilateral development banks.
US singled out in IMF reform. “Deeply” regretting that the IMF quota reform (member countries' voting rights) and the governance reform agreed in 2010 are still not in force, and that the 15th general review of quotas was not completed in January 2014, the G20 urges the US to ratify the 2010 reform before April by breaking the deadlock in the US Congress. Lagarde called for “swift progress” on this. (CG/transl.fl)