The G20 countries are going for drastic changes in national economy policies due to the failure of the global economy to pick up in spite of many steps taken to address the crisis and the negative consequences caused by austerity measures
Although positive signals have been coming from the US economy, the failure of Europe to put recession behind and a slow-down in the economies of developing economies, including China, still continue to add to concerns about a prolonged slowdown. The Group of 20 nations’ finance ministers and central bankers pledged in the G20 Moscow meeting in late July to put growth before austerity, seeking to revive the global economy and adjusting stimulus policies with care so that recovery is not derailed by volatile financial markets.
IMF revises growth projections
Finance ministers and central bankers signed off on a communiqué that acknowledged the benefits of expansive policies in the United States and Japan but highlighted the recession in the euro zone and a slowdown in emerging markets.
“While our policy actions have contributed to contain downside risks, those still remain elevated,” the statement said. “There has been an increase in financial market volatility and a tightening of conditions.”
In another development indicating concern about global growth, the IMF in late July cut its global economic growth forecast. It projected global growth to remain subdued at slightly above 3 percent in 2013 and at 2.8 percent in 2014, marking a 0.2 point decrease from the earlier forecast announced in April. The revision is, the IMF said, “driven to a large extent by appreciably weaker domestic demand and slower growth in several key emerging market economies, as well as a more protracted recession in the euro area.” Foreign trade data from China in July has also been disappointing. China’s exports in July were down 3.1 percent and imports slipped 0.7 percent, coming in at levels much lower than anticipated. Average expectations had been for a 3.7 percent rise in exports and imports to go up 6 percent. However, Chinese officials say the world’s second biggest economy can endure a bit of a slowdown. Chinese Finance Minister Lou Jiwei signaled China may expand less than the official target this year and that growth as low as 6.5 percent may be tolerable in the future.
Things are not much different in other developing nations such as Turkey, Brazil, Mexico, Indonesia and India. Growth projections are being cut one after another in these nations. G20 policymakers in their July meeting soft-pedaled on goals to cut government debt in favor of a focus on growth and decided to leave the issue to be addressed at the leadership level in September. The meetings show that both developing and developed economies have only one goal: achieving growth, no matter at what cost. However, there is no clear information yet on how exactly that will be achieved.
