One of the conclusions of the G20 Finance Ministers and Central Bank Governors meeting (MGM) that was conducted on 22 and 23 February 2014 in Sydney, Australia, was the group's shared view that the global economy is displaying signs of improvement. Indications of global economic improvement are reflected by strengthening growth in the USA, United Kingdom and Japan. In the meeting Indonesia was represented by Finance Minister Chatib Basri and Bank Indonesia Governor Agus Martowardojo.
Furthermore, continued economic growth in China and many emerging economies as well as the resumption of growth in the euro area also provided positive signals. On the other hand, despite the recent improvement, the G20 also recognised a number of challenges that must be managed: weak global demand, high volatility on financial markets, high levels of public debt and ongoing global imbalances as well as vulnerability in a number of emerging countries highlight that there is no time for complacency.
As a concrete measure to catalyse global economic growth, the G20 agreed to formulate comprehensive growth strategies and pursuing ambitious but realistic growth targets. The G20 targets growth in excess of 2 percent above current growth projections over the coming five years. The target is ambitious and therefore requires close coordination and cooperation among member nations as well as policy measures in each respective country.
“Bank Indonesia considers that coordination and collective actions are not only required to overcome crisis vulnerability but also to remove barriers to growth. The G20 must embrace firmer efforts to build the global economy on a stronger foundation but must avoid excessively emphasising the achievement of high growth alone. Aspects of sustainability and balanced growth must also receive commensurate attention,” expressed Martowardojo. “Cooperation between G20 members, particularly between Advanced Economies and Emerging Market Economies, must also be strengthened while paying due regard to the correct sequence,” he added. Martowardojo requested advanced economies to maintain commitment to carefully calibrate monetary policy settings, as well as clearly and transparently communicate policy direction looking ahead (forward guidance).
In addition to the G20 MGM meeting, Martowardojo also attended a meeting with the Bank for International Settlements (BIS) to discuss recent developments in the global economy with a focus on improving the economies of advanced countries in the wake of the 2008 crisis along with its implication on monetary policy. At this meeting, the BIS forum agreed to monitor risks with the potential to impede the economic recovery.
On his visit to Australia, Martowardojo also met bilaterally with the central banks from several G20 member countries, namely Australia, South Korea and China. The meetings were held to boost bilateral cooperation between central banks in anticipation of a variety of global economic developments, particularly in terms of re-doubling crisis prevention and resolution efforts. In general, consensus was reached among central banks from the aforementioned countries regarding the need to bolster bilateral cooperation in order to anticipate an array of developments in the current global economy.
Notes from the G20 MGM meeting in Sydney
G20 countries recognise that investment, particularly in infrastructure, is one of the keys to stimulate global economic growth. Policy reform to remove barriers to private investment is the overarching priority of the G20, coupled with follow-up measures to optimise the impact of government spending on infrastructure and expand the role of Multilateral Development Banks.
In relation to International Monetary Fund (IMF) reforms, the G20 expressed regret regarding the inability of the IMF to complete the 15th General Review of Quotas on time, more specifically by January 2014. The G20 urged the USA to immediately ratify the 2010 IMF reforms by April 2014, thereby ensuring the target of the 15th General Review of Quotas, which is fairer in terms of representing developing countries, is achieved by January 2015. In this instance, Bank Indonesia expects to achieve substantial progress in terms of IMF reforms this year.
Concerning the agenda of the financial sector, the G20 will continue reforms to advance the resilience of financial institutions to a crisis, overcome systemic risk caused by the failure of major financial institutions, overcome the risk posed by shadow banking and continue derivatives market reforms.
Regarding efforts to strengthen financial sector regulation, Bank Indonesia acknowledges the need for in-depth and comprehensive analyses to ensure the quality and application of recommendations contained within the Brisbane Action Plan, while paying due regard to the different stages of financial sector development in each respective country.