G-20: Global Economy on the Mend, But More Work Remains
The global economy is in better standing than it was a year ago, members of the Group of 20 major industrialised economies said during their annual meeting in St. Petersburg, Russia on 5-6 September. However, more work remains, given the fragile nature of the recovery and concern over slowing growth in emerging markets.
The state of the global economy was meant to be the main theme of the event, which was held under the Russian presidency. However, the ongoing conflict in Syria overshadowed most of the proceedings, despite not being on the official summit agenda.
When the group gathered in Mexico City a year ago, fears of a continued Eurozone crisis and impending US "fiscal cliff" had dominated the high-level discussions. (See Bridges Weekly, 7 November 2012) In comparison, this year the global economy appears to be on the mend, a result that officials attributed largely to a "coordinated" response by G-20 members.
"For the first time in three years, instead of an urgent discussion to address the European financial crisis, we see a Europe that has emerged from recession," US President Barack Obama told reporters following the meeting.
However, G-20 leaders warned in their final declaration, "our work is not yet complete," a sentiment that Russian President Vladimir Putin, who hosted this year's meeting, particularly stressed. Actions that the group has pledged to take include an initiative on growth and jobs, as well as a plan to tackle tax evasion by multinationals.
"The most difficult and time-consuming discussions related to the evaluation of the situation of the global economy," Andrei Bokarev, head of the Russian Finance Ministry's international department, told Reuters.
Recent data has confirmed that the global recovery is indeed underway, but at different speeds. Advanced economies have shown signs of improvement, according to recent OECD data. Growth in emerging economies, however, has started to lose momentum, which the G-20 attributed partly to volatile capital flows and domestic structural challenges.
"Our most urgent need is to increase the momentum of the global recovery, generate higher growth and better jobs, while strengthening the foundations for long-term growth and avoiding policies that could cause the recovery to falter or promote growth at other countries' expense," G-20 leaders said.
"Standstill" commitment extended
Back in June, the Geneva-based WTO warned that trade restrictions were again on the rise among G-20 members, and that the pace of rolling back existing measures was not fast enough to prevent these from accumulating. (See Bridges Weekly, 20 June 2013)
Trade officials, including former WTO Director-General Pascal Lamy, have warned that the introduction of such protectionist measures could have damaging effects on global economic growth, and have urged G-20 members to remove such policies.
G-20 leaders agreed in St. Petersburg to extend to 2016 their "standstill commitment" against raising or imposing new barriers to trade and investment in goods and services, a pledge that dates back to the 2010 summit in Toronto. (See Bridges Weekly, 30 June 2010) Members also reiterated their earlier promise to "rollback" any new measures that may have arisen.
Bali ministerial, bilateral deals in focus
The group also issued a public call to WTO members to show new flexibilities in their preparations for their upcoming ministerial conference, which will be held in the Indonesian island province of Bali this December. The global trade body's 159 members has been feverishly working to clinch a deal on select items from the Doha Round of trade talks in time for the high-level gathering, in what many say is a crucial test for the credibility of the multilateral trading system.
"A successful outcome at the WTO Ministerial Conference (MC9) in Bali in December 2013... would be a stepping stone to further multilateral trade liberalisation and progress in Doha Development Agenda negotiations," leaders said in their summit declaration.
"We call on all WTO members to show the necessary flexibilities in order to bridge existing gaps and deliver positive and balanced results at [the ministerial]," they added.
Monetary policy in advanced economies - particularly the US, along with the EU and Japan - was once again under scrutiny during this year's meeting, this time amid news that the US Federal Reserve could soon be slowing down QE3, its controversial quantitative easing programme that had led officials in some emerging economies - most notably Brazil - to warn of a "currency war." (See Bridges Weekly, 20 February 2013)
The impending changes to the QE3 programme have again sparked fears among developing economies that they could suffer "spillover" effects as a result, leading the BRICS countries - Brazil, Russia, India, China, and South Africa - to issue a joint statement calling for the normalisation of monetary policies to be "effectively and carefully calibrated and communicated."
"Unconventional" monetary policies, such as QE3 and similar efforts in the EU and Japan, have "bought time" for global policymakers, International Monetary Fund (IMF) Managing Director Christine Lagarde said at a separate event in Jackson Hole, Wyoming, last week. This time should be used to carry out reforms in order to facilitate future growth, she said, urging countries to "use this time wisely."
The pace of retreating from these "unconventional" policies will also vary depending on the context, the IMF chief said, with Frankfurt and Tokyo likely requiring more time before starting their own exits.
The G-20 official communiqué, action plan, and annexes are all available here.
ICTSD reporting; "G20 says economy recovering but no end to crisis yet," REUTERS, 6 September 2013; "Emerging market pain dominates G20 economy talks," REUTERS, 5 September 2013; "G-20 Leaders Agree to Continue Stimulus Plans," THE NEW YORK TIMES, 6 September 2013.