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G20 nations vows to boost fragile growth | Confident global recovery will gain speed

Saturday, September 5, 2015, 20:18
This news item was posted in Business category and has 0 Comments so far.

ANKARA: G20 finance ministers and central bank chiefs pledged Saturday to act decisively to shore up stuttering global growth and refrain from unsettling currency moves after China’s controversial devaluation last month. In a communique at the end of a two-day meeting in the Turkish capital Ankara, economic supremos from the world’s top 20 economies said global growth was falling short of expectations, despite strengthening activity in some economies. While avoiding any direct mention of China, the statement contained a clear pledge not to resort to competitive currency devaluations to give an unfair advantage to domestic exports. “Global growth falls short of our expectations. We have pledged to take decisive action to keep the economic recovery on track and we are confident the global economic recovery will gain speed,” it said. The group vowed to “carefully calibrate” future actions as key global economies search for robust and sustainable growth. Speaking to reporters, International Monetary Fund managing director Christine Lagarde said worldwide growth remained “too moderate and uneven”. She said most indicators — including trade and investment — were too weak and the only thing that wasn’t was unemployment, which was “too high”. The meeting took place after financial markets worldwide were rattled by China’s clouding growth prospects, the drastic loss in value of its stock market and its sudden devaluation in August of the yuan. In a signal to China to tread carefully in its foreign exchange policies, the G20 vowed to “refrain from competitive devaluations and resist all forms of protectionism”. On the sidelines of the meeting, US Treasury Secretary Jacob Lew pressed his Chinese counterpart to improve communication of economic policy and refrain from competitive devaluations. In an unusually strongly-worded statement, a US treasury spokesperson said Lew also noted that it was important for China to signal that it will allow market pressures to drive the yuan “up as well as down.” “It would be a very bad thing for the global economy if we get into a pattern of competitive devaluation,” a senior US treasury official told reporters. Meanwhile, a long shadow has been cast by uncertainty over the monetary policy of the Fed, which has held its benchmark federal funds rate at the zero level since 2008 to support the economy’s recovery from a recession. While economists say the current robustness of the US economy could justify a rate hike, the so-called lift-off from zero would suck up liquidity badly need by troubled emerging markets. Key emerging markets are already in severe trouble, in particular Brazil and Russia, which are both in recession. The statement said the G20 noted “that in line with the improving economic outlook, monetary policy tightening is more likely in some advanced economies”. Lagarde, who has previously expressed anxiety over the prospect of a Fed rate rise, urged it to carefully consider any move and be sure it was well founded in economic data. “It should really do it for good… not give it a try and then have to come back,” she said. But the governor of France’s central bank, Christian Noyer, was more sanguine, saying a rise was inevitable and “the markets are well prepared, it’s not the date that counts”. The statement urged governments and central banks not to over-use interest rates as a tool for boosting economic activity and instead to implement fiscal policies to support growth and job creation. “Monetary policy alone cannot lead to balanced growth,” the communique said. In contrast to previous meetings, the gathering was not dominated by the crisis in the euro zone, after the deal over Greece’s third bailout soothed nerves. The US treasury official hailed signs of stronger growth in Europe but said “it would be a good thing if it was growing in a stronger way than it is.” While there was “steady and strong growth” in the US economy, the United States “cannot be the only engine of growth,” said the official. The G20 has also taken up the issue of migration as Europe reels over its largest movement of people since World War II, with the issue brought sharply into focus by distressing images of a drowned Syrian toddler on the shores of a Turkish tourist resort. Turkish Deputy Prime Minister Cevdet Yilmaz said the issue would be discussed at the G20 leaders summit in Antalya in November while Lagarde said the crisis “requires coordinated approach and probably an innovative solution as well.”      

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