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 coordinate policies to avoid “surprises” that could roil emerging markets.
After opening the two-day meeting of the G20 finance ministers and central bankers yesterday, 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.
French Minister of Finance 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A G20 source said the Germans had withdrawn their opposition to setting an overall target, as long as there were no goals imposed for individual states.
Not all of the German camp seemed to be happy, with Bundesbank President Jens Weidmann saying quantitative targets were “problematic in my view.”
The plan borrows wholesale from an IMF paper prepared for the G20 meeting that estimated structural reforms would raise world growth by about 0.5 percentage points per year over the next five years, boosting global output by US$2.25 trillion.
The IMF forecast global growth of 3.75 percent for this year, accelerating to 4 percent next year.
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 it throttles back on its asset buying.
There was never much expectation the Fed would consider 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,” Hockey said.
Others were not so sure.
“I am skeptical about coordination in monetary policy within the G20”, Weidmann said, adding that every central bank had to act according to their own mandate.