The G20 major economies represented by their respective finance ministers have agreed to fast track global growth. This will be made possible by implementing policies meant to spur the world economy by more than $2 trillion in the next five years. In a landmark deal coming from a meeting of some of the world’s finance ministers and central bank authorities in Sydney, Australia, the agreement indicates of the growing optimism of the group with the world economy. This is particularly true with the stronger economic gains in U.K., China, Japan and the U.S.
The final communique from the two-day meeting agreed to develop ambitious but attainable policies with the goal of increasing the collective Gross Domestic Product (GDP) by more than two percent in the next five years.
The Australian Federal Treasurer Joe Hockey was the host of the G20 major economies meeting and said that the results achieved so far by this group is “unprecedented”. Previous meetings failed to produce any agreements as participants often debate on any fiscal or current account targets. Debate was still present on this meeting but the common consensus was the need for growth as against budget austerity. It was also recognized that there was a lot of private money in the world that can be utilized into building new facilities.
The agreement once implemented could also create over several millions of new jobs around the world. Hockey also mentioned about the details and comprehensive growth strategies for all these plans will be finalized and presented in another G20 major economies meeting this November at Brisbane. This time, the respective leaders of each G20 major economies will be present.
During this November meeting, the G20 countries will make commitments to increase new private investments especially in infrastructure as well as increase the number of women workforce employed in major industries. Hockey added that domestic reforms implemented in one country can have a positive impact on the growth of the other countries as well as eventually affecting the wider global economy.
Although several economies are showing signs of recovery and growth, Hockey added that the overall global economy needs more push to achieve a more balanced and sustainable growth in the long run. This global concern is more apparent with regard to the high levels of public debt, persistent global imbalances, volatility in the financial markets and weaknesses of some economies.
The agreed upon growth plan was taken from the International Monetary Fund’s (IMF) position paper presented during the Sydney meeting which estimated that a structural alteration has the potential to increase global economic output by 0.5 percent annually in the next five years allowing the world to reach an output of $2.25 trillion. IMF estimates that the global economic growth is seen to reach 3.75 percent for 2014 and four percent for the year 2015.
The meeting may be considered a success in many fronts, however Hockey said that it is unfortunate the meeting was not able to move forward with regard to the IMF reforms that was on the agenda since 2010. Hockey reminded the U.S. to ratify the reforms agreed in 2010 about allowing developing countries to have a larger say in how IMF is run. The U.S. executive branch has already requested it but the U.S. Congress has refused to support the suggested reforms. “These reforms are critical to ensure that the IMF represents its entire constituency.” added Hockey. Countries with emerging economies like Brazil, Russia, India and China have been complaining for years about their small voting rights in the IMF considering their increasing contributions in the world economy.
Australia is acting as the host and the president of this year’s G20 major economies meeting. Last year, Russia was given the opportunity to handle this role and for 2015, Turkey will be given the chance to host this major global event.
It is indeed good news for many people especially from the poor and developing countries if the G20 major economies will implement policies needed to fast track real economic global growth.
By Roberto I. Belda