IMF lauds G20 growth agenda, urges joint action
Sydney, February 23, 2014
International Monetary Fund (IMF) managing director Christine Lagarde commended the G20 for its growth agenda, but also warned that more action and international cooperation was needed to promote a more robust global recovery - one that is sustained and fosters healthy job creation - and to counteract actual and potential risks.
"Though global growth has strengthened in recent months, largely driven by advanced economies, increased financial market and capital flow volatility in emerging economies and low inflation rates in advanced economies pose key challenges ahead," said Lagarde in a statement issued on Sunday at the conclusion of (G20) Finance Ministers and Central Bank Governors Meeting in Sydney.
She welcomed the G20 agreement to develop and implement measures aimed at lifting collective GDP by at least an additional two per cent over the coming five years, or equivalent of $2.25 trillion.
"This goal is attainable and is in line with IMF analysis presented to the G20 this week. Measures to support investment, boost trade, and promote competition will be essential for more sustainable and robust growth, as noted by the G20," stated the IMF chief.
“It is also important that the G20 committed in Sydney to consistently communicate monetary policy actions with the aim of aiding efforts to manage spillovers. Global dialogue and improved communication are essential to help safeguard financial stability. They also committed to take the necessary steps to manage deflationary and inflationary pressures," said Lagarde.
"The IMF supports these efforts, and stands ready to assist its members with policy advice, and where needed, with financing," she added.
Lagarde also noted the G20's disappointment over the lack of progress in making effective the IMF’s 2010 Quota and Governance Reform and their intention to take stock in the next few months of progress towards meeting this goal.
The top global economies had earlier expressed "deep regrets" that the progress on giving emerging nations more say in the IMF had stalled.
Major emerging powers including India, China, Brazil and Russia, have long lobbied for increased voting power in the IMF to reflect their growing share of the world economy, but the changes have been blocked by the US Congress, said the G20 in its statement.
Commenting on the issue, Lagarde said: "At the IMF, we share this view and urge rapid progress on implementation. I look forward to continuing discussions on this matter and many of the issues explored in Sydney at the next meeting of the International Monetary and Financial Committee (IMFC) scheduled for April in Washington."
The top 20 economies in their final communique expressed optimism that the worst of crisis-era austerity was behind them.
The members also pledged to take concrete action to increase investment and employment, among other reform. The group accounts for around 85 per cent of the global economy.
There was a nod to concerns by emerging nations that the Federal Reserve consider the impact of its policy tapering, with the communique saying central banks would be mindful of the effects on the global economy.
The two-day meeting ended on Sunday with a round of news conferences by top officials, including European Central Bank president Mario Draghi and Lagarde.
The growth plan borrows wholesale from an IMF paper prepared for the G20 meeting, which estimated that structural reforms would raise world growth by about 0.5 per centage points 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 and 4 per cent in 2015.
The target remains vague at the moment, with no road map on how nations intend to get there or repercussions if they never arrive. The aim was to come up with the goal now, then have each country develop an action plan and a growth strategy for delivery at a November summit of G20 leaders in Brisbane.
Agreeing on any goal is a step forward for the group that has failed in the past to agree on fiscal and current account targets. And it was a sea change from recent meetings where the debate was still on where their focus should lie: on growth or budget austerity.
It was also something of a feather in the cap of Australian Treasurer Joe Hockey, who spearheaded the push for growth in the face of some scepticism, notably from Germany.
Australia is acting as president of the G20 this year, following Russia in 2013 and ahead of Turkey next year.-Reuters