Finance ministers and central bankers face a tough task coordinating action to spur global growth at G20 meetings this week, with major economies running at different speeds and monetary policies diverging.
Concern over the ability of the US to sustain the global economy as most of the world slows are set to be high on the agenda as the G20 leading economies holds talks in Istanbul yesterday and today.
The meetings come as Greece casts a new shadow over Europe, cheap oil plays havoc with inflation and growth forecasts and a strengthening US dollar threaten emerging economies.
“There is a lot at stake,” IMF managing director Christine Lagarde said in a blog post on Friday. “Without action, we could see the global economic supertanker continuing to be stuck in the shallow waters of sub-par growth and meagre job creation.”
Turkish Deputy Prime Minister Ali Babacan told an Institute of International Finance (IIF) meeting on Sunday that tackling sluggish global growth and giving low-income nations more voice would be among the priorities for Turkey’s G20 presidency.
The former will be easier said than done.
US Secretary of the Treasury Jack Lew said last week the US could not be “the sole engine of growth” and a senior US official said Washington’s message going into the meetings would again be that Europe is not doing enough.
World financial leaders agreed last year to launch new measures to raise their collective GDP growth over the next five years and create millions of new jobs.
The pledge, called the Brisbane Action Plan, entails about 1,000 commitments. European officials said leaders in Istanbul were likely to agree to focus down to just 5 to 10 priorities per nation to make them easier to monitor.
“Kick-starting global growth will be front and center” at the G20 meetings, Canadian Minister of Finance Joe Oliver said last week, citing the stalled eurozone, slowdowns in China and India and geopolitical crises in Ukraine, Iraq and Syria as key risks.
“Though America is carrying the world economy at the moment, that is simply not sustainable,” he added.
Germany is likely to argue that its rising domestic demand and plans to increase public spending show Europe’s largest economy is doing what it can, according to European sources familiar with the G20 agenda.
Babacan said pushing G20 members to meet previous reform commitments would be key, a strategy he has dubbed “keep your word, or explain.”
“It has a lot to do with leadership ... Doing the necessary but difficult things,” he said.
Coming good on pledges made at November last year’s G20 summit in Brisbane could add more than US$2 trillion to the global economy and create millions of new jobs over the next four years, Lagarde said in her blog post.
UBS Group AG chairman Axel Weber said enabling the private sector to help close the financing gap for an estimated US$60 trillion to US$70 trillion in infrastructure spending needed by 2030 would fuel growth.
Higher capital requirements are limiting banks’ ability to invest and regulators should “revisit whether they got that calibration right,” the former Bundesbank president told the IIF meeting.
“My key message to policymakers would be very easy; don’t work against the private sector, work with it,” he said.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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