Group of 20 leaders have agreed to take measures that would boost their economies by a collective $2 trillion by 2018 as they battle patchy growth and the threat of a European recession.
Citing risks from financial markets and geopolitical tensions, the leaders said the global economy is being held back by lacklustre demand, according to their communique following a two-day summit that ended yesterday in Brisbane, Australia.
The group submitted close to 1,000 policy changes they said would lift growth and said they would hold each other to account to ensure they are implemented.
“There are some worrying warning signs in the global economy that are threats to us and our growth,” UK prime minister David Cameron said after the meeting.
“If every country that has come here does the things they said they would in terms of helping to boost growth,” including trade deals then growth will continue, he said.
Action to bolster growth comes as policies around the world are diverging with the US tapering its monetary easing as it boasts the strongest economy among advanced nations, while Europe and Japan add further stimulus to ward off deflation. The International Monetary Fund last month cut its projection for world economic growth next year to 3.8%.
The mostly structural policy commitments spelled out in each country’s individual growth strategy include China’s plan to accelerate construction of 4G mobile communications networks, a A$476m (333m) industry skills fund in Australia and 165,000 ‘affordable’ homes in the UK over four years.
IMF managing director Christine Lagarde told the leaders that to avoid the “new mediocre” of low growth, low inflation, high unemployment and high debt, all tools should be used at all levels, she said at a press conference yesterday in Brisbane.
“That includes not just monetary policy, which is being significantly used, particularly in the eurozone, but also fiscal policy, structural reforms and, under certain conditions, infrastructure,” she said.
The IMF and Organisation for Economic Co-operation and Development assessed the policy commitments and said they would raise G20 gross domestic product by an additional 2.1% from current trajectories by 2018, according to the communique.
“It’s a worthy objective for the G-20 as global growth is still lagging,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which manages about €100bn.
The G-20 also agreed to set up a global infrastructure hub in Sydney, with a mandate of four years. It would encourage the exchange of information among governments, the private sector, development banks and other international organisations.
“With the global economy struggling with an uneven recovery, we welcome G-20 leaders’ commitment to raising growth and delivering quality jobs,” World Bank Group president Jim Yong Kim said. IMF reform to give emerging economies more equal representation remains a priority and leaders are “deeply disappointed” with delays in implementing changes agreed in 2010, according to the communique.
The G-20 urged the US to ratify the changes. It said if it does not happen by the end of the year it would ask the IMF to provide other options, according to the communique.