Kivanc Dundar in Istanbul -
Financial leaders of the world’s largest 20 economies pledged decisive action to keep the economic recovery on track amid warnings from the International Monetary Fund (IMF) that global growth in the first half of 2015 was lower than in the second half of last year.
“We have pledged to take decisive action to keep the economic recovery on track and we are confident the global economic recovery will gain speed,” said the communique of the G20 finance ministers and central bank governments following a two-day summit in Ankara, Turkey between September 4 and September 6.
“Monetary policies will continue to support economic activity consistent with central banks’ mandates, but monetary policy alone cannot lead to balanced growth,” it said.
Even though the financial leaders admitted that global growth is falling short of expectations, they said they are confident the global economic recovery will pick up. The G20 economies reaffirmed the role of macroeconomic and structural policies to support our efforts to achieve strong, sustainable and balanced growth.
“We note that in line with the improving economic outlook, monetary policy tightening is more likely in some advanced economies,” added the communique.
Boosting investment is a top priority, the G20 officials agreed. “To this end, we have prepared country-specific investment strategies that present concrete actions in order to improve the investment ecosystem, foster efficient infrastructure investment and support financing opportunities for [small and medium-sized businesses],” they said.
Christine Lagarde, managing director of the IMF, warned in a statement at the conclusion of the G20 summit that growth remains moderate and uneven. “For the advanced economies, activity is projected to pick up only modestly this year and next. For the emerging market economies, prospects have weakened in 2015 relative to last year, though some rebound is projected next year,” Lagarde said.
Emerging economies may see more market volatility and have to struggle with stronger headwinds if the US Federal Reserve starts to raise interest rates later this year. Concerns about emerging markets are amplified by fears over China’s economic outlook. However, the communique did not specifically refer to possible Fed rate hike as a potential risk to global growth. The ministers assured that they will carefully calibrate and clearly communicate their actions against the backdrop of major monetary and other policy decisions.
It has been a major concern that because of bleak global economic outlook some nations may devalue their currencies to gain competitive advantage over their rivals, triggering dangerous currency wars. G20 ministers called for market-oriented rate setting. “We reiterate our commitment to move toward more market-determined exchange rate systems and exchange rate flexibility to reflect underlying fundamentals, and avoid persistent exchange rate misalignments”, the communique said. But they did not specifically mention China’s unexpected devaluation of the yuan last month.
Turkish President Recep Tayyip Erdogan delivered a speech at the opening ceremony of the conference on the sidelines of the G20 summit but he failed to turn the whole event into an effective publicity stunt ahead of the November 1 snap election, in which he's desperate to regain a parliamentary majority for his AK Party. Erdogan, however, still used the opportunity to blame the West for not responding to the refugee crisis. “European countries that turned the Mediterranean into a grave for refugees are responsible for every refugee who lost their life,” he said.
The event was organized at a time when the country is facing one of its biggest political turmoil in the past 12 years. There has been a political vacuum since the June 7 elections produced a hung parliament and violence with the Kurdish insurgents has engulfed the country’s southeastern provinces.
Even the country’s radical left paid little attention to the summit. A handful of demonstrators gathered in front of the Turkish Union of Chambers and Commodity Exchanges (TOBB) building on September 3 to protest the summit. Police detained 17 of them.
Erdogan probably knew that the public, now worried about domestic problems, would not buy empty rhetoric that how Turkey with its democratic institutions and strong economy is an inspiration to the millions in the Middle East and wider Islamic world. Turkey does not have the same credibility now in the eyes of the West and the Muslim world as it enjoyed two or three years ago.
Erdogan’s appearance at the G20 summit peppered with a speech about Turkey’s past achievements would do little to boost investors’ confidence in the $800bn economy that is yet to show signs of recovery. Investors want political stability and expect clear actions from the authorities and decision makers when the lira is almost every day flirting with another record low against the dollar.
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