The world’s biggest economies have agreed to target reforms aimed at adding more than $2 trillion to the global economy over five years, marking a shift in emphasis at G20 level from championing austerity to promoting growth as the financial crisis recedes.
“We will develop ambitious but realistic policies with the aim to lift our collective GDP [gross domestic product] by more than 2 per cent above the trajectory implied by current policies over the coming five years,” said ministers in a joint G20 communiqué. “This is over $2 trillion more in real terms and will lead to significant additional jobs.”
However if there was unity over growth, there was less harmony on the US move to end an era of ultra-loose monetary policy. Central bankers in some of the big emerging markets, such as India’s Raghuram Rajan, have hit out at selfish policies pursued by the US and the developed world, claiming they lead to turmoil in their own countries.
Monetary policy
But there was no major shift in position with ministers merely re-iterating their commitment for monetary policy among G20 members to be "carefully calibrated and clearly communicated".
The G20 combines the world’s major industrialised and developing countries, which account for about 85 per cent of the global economy. Since the global crisis struck in 2008, it has become the world’s premier trouble-shooter.
The setting of a numerical target for future global economic growth represents a change of strategy at G20 level.
But amid scepticism from Germany, the European Central Bank and some other participants, the growth target remains largely aspirational.
“It is kind of ambitious to set a numerical target for the whole world, well the G20 world,” said Mario Draghi, ECB governor. However, he welcomed the broad thrust to target economic growth.
Leaders from G20 countries are expected to outline what reforms they expect to implement when they meet in November in Australia.
Ministers said they welcomed the improvement in the global economy. But they warned there was no room for complacency.
– (Copyright The Financial Times Limited 2014)
