WASHINGTON – The world’s top finance officials expressed confidence Saturday that the global economy finally has turned the corner to stronger growth. This time, they may be right.
Despite challenges that include market jitters about the Federal Reserve’s bond-buying slowdown and global tensions over Ukraine, policymakers said they believe there is a foundation for sustained growth that can provide jobs for the millions of people still looking for work five years after the worst recession since the Great Depression of the 1930s.
“Creating a more dynamic, sustainable, balanced and job-rich global economy remains our paramount collective goal,” the policy-setting panel of the 188-nation International Monetary Fund said in a concluding communique.
IMF Managing Director Christine Lagarde and the finance ministers who sit on the IMF’s policy panel said they believed the world had entered a new phase with stronger growth that will begin to make in-roads into unemployment that remains painfully high in many nations.
At a closing news conference, Lagarde referred to the years 2008 through 2010 as an economic “disaster” and she said now “we are moving into a strengthening phase.”
The IMF in its latest economic forecast predicted global growth would strengthen to 3.6 per cent this year and an even better 3.9 per cent in 2015.
That growth is being supported by a stronger recovery in the United States, which private economists believe could grow this year at the fastest pace in five years. This strength in the world’s largest economy is helping to offset some slowing in major emerging markets such as China although emerging economies are still powering ahead at rates well ahead of developed nations.,
The finance officials acknowledged a number of threats to their forecast, ranging from periodic stock market jitters as investors worry that the Fed may mishandle its effort to gradually end the bond buying it has used to lower long-term interest rates to concerns that the political stand-off over Russia’s annexation of Crimea could undermine market confidence.
On Ukraine, the finance ministers endorsed the IMF package of $14 billion to $18 billion in loans to help the country avoid a financial meltdown but urged a go-slow approach to imposing additional economic sanctions on Russia. The United States had hoped for more resolve in this area to discourage Russia from trying to annex more of Ukraine but European nations, with closer economic ties to Russia, said diplomatic efforts should be given more time to work.
The conclusion of Saturday’s discussions ended three days of talks that began with meetings by finance ministers and central bank presidents of the Group of 20 nations, the mix of traditional economic powers such as the United States, Japan and Germany and emerging economies such as Russia, China and India.
U.S. Treasury Secretary Jacob Lew and Federal Reserve Chair Janet Yellen represented the United States in the discussions.
At a final news conference following a meeting of the World Bank’s policy-setting panel, World Bank President Jim Yong Kim said he was encouraged by the strong support he had received from the committee for the efforts he is undertaking to make the bank, the largest single provider of development support, more efficient.
The United States came in for criticism at the meetings. The IMF statement said officials were “deeply disappointed” with the continued delay in congressional approval of the legislation to provide expanded loan resources to the IMF to help countries in trouble.
The IMF said that if the Congress failed to pass the measure by year’s end, it would explore other options. Officials said those options could weaken America’s ability to influence the global economy and lead to a more fragmented world.
Such a development would produce “a world that will be less safe,” said Singapore’s finance minister, Tharman Shanmugaratnam, chairman of the IMF committee.
The IMF panel endorsed the target set by the Group of 20 nations to boost global growth by $2 trillion in the next five years. But the IMF said achieving this result will require putting the proper government policies in place, including a careful scaling back of low-interest rate policies pursued over the past five years by the Fed and other central banks.
The IMF communique said the Fed needed to clearly communicate its future moves to avoid taking markets by surprise and it urged the European Central Bank, which conducts monetary policy for the 17 nations that use the euro currency, to consider further moves to provide economic stimulus if “low inflation becomes persistent” in Europe.
Ahead of the meetings Mario Draghi, head of the ECB, had criticized Lagarde for being overzealous in her policy recommendations and suggested that she would not have dared to lecture the Fed in the same way. On Saturday, Draghi was more restrained in his comments, saying the ECB intended to maintain its accommodative monetary policies while cautioning that those policies cannot solve all the problems facing Europe.
The finance ministers concluded their meetings with a pledge to come up with concrete proposals that each country will pursue to boost growth by the 2 per cent target adopted by the G-20. Those plans will be reviewed by the G-20 at its next meeting in September in Australia, ahead of a summit to be attended by President Barack Obama and other G-20 leaders in Brisbane on Nov. 15-16.
The G-20 group, which represents 85 per cent of the global economy, includes Russia but wealthy nations have said they will boycott a Group of Eight summit that was to be hosted later this year by Russia because of Moscow’s actions in Ukraine.
Associated Press writers Paul Wiseman and Matthew Pennington contributed to this report.
World Bank: http://www.worldbank.org