G-20 Finance Chiefs Set Two Percent Growth Goal

27 February 2014

Finance ministers and central bank governors from the Group of 20 major industrialised and emerging economies agreed to aim for a two percent - effectively US$2 trillion - increase in their collective GDP over the next five years, with the coalition's leaders set to release national plans for reaching this goal when they meet in Brisbane in November.

Meeting in Sydney this past weekend, the officials said that this increase is part of a broader effort to ensure that the global economic recovery remains on firm ground. The group warned that - recent improvements not withstanding - growth today is still far under the levels needed to "get our citizens back into jobs and meet their aspirations for development."

"There is no room for complacency. Addressing these challenges requires ambition," they said in their final statement, pledging to take a series of "concrete actions" aimed at increasing investment, employment, trade, and competition.

"These actions will form the basis of our comprehensive growth strategies and the Brisbane Action Plan," the group added, referring to the planned outcome document for their November leaders' meeting.

To meet this two percent collective goal, "each country will take to the Brisbane summit its plan for economic growth overall," Australian treasurer Joe Hockey told reporters. "We don't have central planning out of the G-20 for individual countries."

This year's leaders' summit will come at a time when the global economy is seeing slow signs of a rebound, following a prolonged crisis. The G-20, which represents over 75 percent of global trade and 85 percent of global GDP, declared itself the "premier forum" for global economic cooperation during the early years of the financial slump, though some have since questioned how effective the coalition's commitments have been in practice.

Australian Prime Minister Tony Abbott, whose country holds this year's rotating G-20 presidency, has said that increasing trade, combatting tax avoidance, increasing infrastructure investment, reducing unemployment, and improving financial sector resilience are going to be key topics for the November gathering, which he insisted would be "more than a talkfest." Of these topics, he said in January in Davos, "trade comes first." (See Bridges Weekly, 30 January 2014)

Monetary policy

The move by some developed economies - most notably the US and  Japan - to take on monetary easing programmes in an effort to achieve domestic policy objectives, such as reducing unemployment or combatting deflation, has come under increasing scrutiny in recent years. Emerging economies in particular had raised concerns over the effects these policies could have on their markets - including the potential for such moves to affect exchange rates, and in turn, trade.

The expected reduction - or removal - of such easing policies, however, has incited additional concerns, should these be downscaled too quickly and create new spillovers.

In this context, G-20 finance officials pledged to "consistently communicate our actions to each other and to the public, and continue to cooperate on managing spillovers to other countries, and to ensure the continued effectiveness of global safety nets."

The document also included a recognition of the need to keep monetary policy "accommodative" in many advanced economies, a reference that officials from these countries said was an affirmation of their approach.

"By ending prolonged deflation, Japan can benefit not only its economy but the global economy as a whole," Bank of Japan Governor Haruhiko Kuroda said after this weekend's meeting. "We've explained this in various international gatherings, and I think our view has been recognised by the G-20 members."

IMF reform

Another topic that is expected to feature on the G-20 agenda this year is the pace of instituting a series of reforms to the International Monetary Fund, mainly to shift more power to developing and emerging market countries in order to reflect their growing weight on the world stage. The planned changes, which were agreed in 2010, would also double the IMF's quota overall to US$734 billion.

That commitment was dealt a body blow early into the new year, when the US Congress agreed on a long-awaited budget deal that failed to include IMF funding, despite efforts by the White House and the US Treasury Department.

"We deeply regret that the IMF quota and governance reforms agreed to in 2010 have not yet become effective and that the 15th General Review of Quotas was not completed by January 2014," the finance ministers' communiqué said, adding that ratifying these reforms was a matter of "highest priority."

"We urge the US to [ratify these reforms] before our next meeting in April," they added, noting that the upcoming spring meeting - also at the finance officials' level - will be a chance for them to take stock of progress toward this goal and of completing the 15th General Review of Quotas by next January.

The G-20 includes Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union.

ICTSD reporting; "HIGHLIGHTS-Comments from policymakers after G20 meeting in Sydney," REUTERS, 23 February 2014; "US fails to approve IMF reforms," FINANCIAL TIMES, 14 January 2014; "U.S. Congress again rebuffs IMF funding request," REUTERS, 13 January 2014.

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