G20 set to adopt ambitious target for global growth
Sydney, February 22, 2014
The world's top 20 economies may agree to set an ambitious target for faster global growth at a weekend meeting in Sydney, where major central banks are also being urged to co-ordinate policies to avoid "surprises" that could roil emerging markets.
Opening the two-day meeting of the Group of 20 finance ministers and central bankers on Saturday, Australian Treasurer Joe Hockey said support was building for setting a numerical goal for growth.
"I have a great sense of hope that this G20 meeting will be able to lay down a real and tangible framework for an increase in the growth of the global economy over the next five years," said Hockey, who is hosting the Sydney gathering.
If adopted, the plan would mark a departure for the G20, as previous attempts to set fiscal and current account targets have dissolved into bickering. And while a target would largely be aspirational, it would mark a sea change from recent meetings where the debate was all about growth versus budget austerity.
France's finance minister, Pierre Moscovici, welcomed a goal of lifting world growth by a total of 2.5 percentage points over five years, calling it ambitious but "not unrealistic".
A G20 source said the Germans had withdrawn their opposition to setting an overall target, as long as there were no goals imposed for individual states.
However, not all the German camp seemed to be happy, with Jens Weidmann, head of the country's central bank, saying quantitative targets were "problematic in my view".
And Nhlanhla Nene, South Africa's Deputy Finance Minister, said there was still a lot of work to be done.
"For us, whatever the target is, if that target doesn't talk to our issues of dealing with inequality, unemployment, dealing with our growth, but also looking at the broader integration and making sure that we have a stable environment at the global level in which to operate, unless they talk to that it wouldn't mean anything to us," he said.
The plan borrows wholesale from an International Monetary Fund paper prepared for the G20 meeting which estimated that structural reforms would raise world growth by about 0.5 percentage point per year over the next five years, boosting global output by $2.25 trillion.
The IMF has forecast global growth of 3.75 per cent for this year, accelerating to 4 per cent in 2015.
The laundry list of reforms run the usual gamut of liberalizing product and labor markets, lowering barriers to trade, attracting more women into the workforce and boosting investment in infrastructure.
"While the gains stem mostly from policies that countries need to implement for their own good, joint action could produce beneficial growth spillovers in the longer term," was the IMF's argument for pressing on with action.
Still there were no details on how or whether the G20 would police each country's progress on the reforms, many of which would likely be politically unpopular at home.
The onus would be on the rich nations to pick up the baton on growth from the developing countries, who had carried the world economy in the wake of the global financial crisis.
The emerging members have also been pressing for the US Federal Reserve to try to avoid sparking market volatility through better messaging as its throttles back on asset buying.
There was never much expectation the Fed would consider actually slowing the pace of tapering, but its emerging peers were hoping for more cooperation on policy.
"I think if there was a "no surprises policy" in relation to monetary policy, and that central banks around the world have reasonable warnings of what may be events that do create market volatility, then I think that is not unreasonable," said Australia's Hockey.
Others were not so sure.
"I am skeptical about coordination in monetary policy within the G20", said the Bundesbank's Weidmann, emphasizing that every central bank had to act according to their own mandate.-Reuters