G-20 Summit: new guidelines for the global economy

The foregoing achievements include promotion of investment in the infrastructure development as part of the establishment of the Global Infrastructure Center, defining target indicators for employment incentives and labor market strengthening, as well as the strengthening of the international banking system through the adoption of additional requirements of the Financial Stability Board. The G-20 Summit has therefore proved its originally intended purpose as forum for discussion of financial and economic issues.

The G-20 Summit in Brisbane is relevant not only in terms of defining new guidelines for further development of the global economy, but also summing up the results of the world leading economies' compliance with their commitments assumed at the previous summits.

With regard to the fiscal policy, despite new imbalances in the global economy, some of the G-20 countries has complied with the commitment to reduce their budget deficit through fiscal consolidation by 2013, which they assumed in Toronto in 2010. At the same time, many developed countries still have a high public debt to GDP ratio, as well as structural deficit posing high risks to the global economy at large. Unlike the developed countries, some of the fastest growing economies such as Argentina, India, Indonesia, Turkey have substantially reduced their debt in relation to the GDP indicator.

With regard to the monetary policy, it is high inflation in the G-20 members that is still posing the key risk to the global economy. The G-20 countries have substantially advanced in complying with the commitment to establish flexible exchange rates. Most of the developed economies still have a free floating exchange rate. Fastest growing economies have recently shown far less frequent interventions into exchange rate control. In China for instance the Yuan exchange rate has been more governed by market forces, while Russia is about to complete the transition to a floating exchange rate.

The successful efforts of the countries in complying with the commitments regarding monetary and fiscal policies make it possible to comply with the commitment to increase by 2% the GDP in the G-20 countries by 2018, which was assumed in Brisbane. The foregoing growth, according to IMF and OECD estimates, can generate extra $2 trillion, as well as support the creation of millions of new jobs.

Substantial progress was noted at the Summit in terms of G-20 countries' compliance with their commitment to undertake structural reforms, in particular in the areas relating to employment market regulation, development of human capital and infrastructure. It is the fastest growing economies that have achieved a particular success. For example, Brazil has been noted for high growth in infrastructure expenditure regarding the expansion of projects on public-private partnership (PPP). India has taken measures to strengthen the system of corporate governance regulation while Mexico undertaken structural reforms in certain sectors such as energy, telecommunications, education, labor market. With regard to structural reforms, the Russian Federation is focused on the strengthening of the system of consumer financial protection, as well as the transport infrastructure development.

 

Additionally, the summit in Brisbane produced a new round in the development of the policy aimed at structural reforms as part of the G-20 comprehensive growth strategy. The leaders of G-20 countries made a decision to establish the Global Infrastructure Center for a period of four years as the basis for interaction between governments, private sector, international organizations for the purpose of sharing experience between the counterparties and fundraising for infrastructural projects.

Furthermore, the G-20 members' progress achieved in employment incentives was reinforced by new commitments to cope with the gender imbalance and create more than 100 million jobs for women by 2025, the solution of the issue of structural and long-term unemployment, as well as the development of individual entrepreneurship.

All in all, the G-20 countries have demonstrated the quality progress in terms of adhering to the previously assumed commitments. The success can be reinforced by consistent compliance with the new commitments assumed in Brisbane for the year to come.

However, the summit saw failures that are worth noting, namely the lack of proposals on how to comply with the previously assumed commitment to ensure sustainable and balanced growth of the global economy. Indeed, certain member countries' economic growth strategies as well as their progress reports on the respective commitment is a sizable contribution in pursuing the objective set by the G-20 countries. However, it is coping with structural imbalances at the level of national economies that is more important for the member countries to be able to achieve the foregoing objective.

Yuri Zaitsev, senior researcher