G20 Fin Ministers Meet in Istanbul, Exchange Fluctuations, Stimulus and Fall in Oil Prices

Finance ministers and central bank governors from the Group of 20 major economies pledged to “act decisively” on fiscal and monetary policy if necessary in order to address uneven global growth prospects, Greece’s ongoing debt problems, and other concerns.

The meeting, held in Istanbul from 9-10 February, was the first under the Turkish G-20 presidency, and was considered by analysts to be a key test of the group as it moves to implement the “national growth plans” announced by leaders in Australia in November.

Brisbane implementation

Hoping to jumpstart the global economic recovery, G-20 leaders agreed last year in Brisbane to implement national growth plans, though these pledges are by nature non-binding.

Collectively, these plans set down over 800 new measures focused on trade, employment, investment, competition, macroeconomic policy, and other reforms targeted to stimulate the global economy.

If successful, the plans could add over US$2 trillion, or 2.1 percent, to G-20 members’ growth above current trajectories by 2018.

Trade, currency

As a part of the structural reforms promised in Brisbane, trade also served as a topic of conversation both during the summit and the days leading up to it.

But while Lagarde pointed to trade deals such as the planned Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP) as positive opportunities to “spur economic growth,” and the communiqué called trade “critical” to greater growth, others suggested potentially troubling trends.

Monetary policy and its effects were among the issues raised at the meeting, officials say.

While the US Federal Reserve is working to normalise its monetary policy, the European Central Bank (ECB) and Japan’s Central Bank are both continuing with aggressive monetary stimulus efforts – a combination that some have warned could lead to excessive financial market volatility if not managed properly.

“The Americans very precisely warned everybody” about the use of currency manipulation as a way to boost national exports, an official from another G-20 member told the Reuters news agency.

Positive developments

Although the overall picture painted during the summit was relatively bleak, given the challenges ahead, the ministers did note some reasons for optimism.

For one, the sharp decrease in oil prices is expected to boost growth, especially for oil importers.

This change, the communiqué concluded, should allow importing countries to re-evaluate their existing fiscal policies in order to abandon “inefficient fuel subsidies in favor of investment” and better redistribution programs.

The communiqué also called the recently-announced ECB program of quantitative easing as a positive development that “will further support the recovery in the euro area.”

Coming up

The G-20 finance ministers are next scheduled to meet in April in Washington, on the sidelines of the International Monetary Fund and World Bank Annual Spring Meetings.

Subsequent meetings are planned for September in Ankara, Turkey, and October in Lima, Peru, before the 2015 meeting of heads of state in November in the Turkish city of Antalya.