Finance ministers and central bankers from the Group of 20 have said they will work to grow their collective gross domestic product (GDP) by an additional two percent of world GDP or about $2 trillion over five years. This would be an increase of 10-12% over projected world GDP growth that was expected for the next five years.
The 20 nations that account for roughly 85 percent of the world’s economy.
“We will develop ambitious but realistic policies with the aim to lift our collective GDP by more than two percent above the trajectory implied by current policies over the coming five years,” the statement said.
The goal proposed by Hockey stemmed from an International Monetary Fund paper prepared for the Sydney meeting. The IMF analysis estimated that if structural reforms were implemented, the global economy could grow by about 0.5 percentage points per year over the next five years. It forecast global growth of 3.75 percent for this year, going up to 4 percent in 2015.
The implementation of the necessary structural reforms for sustainable growth provided much fodder for the leaders in attendance over the weekend, as each nation would have develop its own plan to achieve the fiscal goals.
“If we want to have – not just job creation, but job security – then we all have a responsibility to undertake structural reform,” Hockey said.
These reforms include liberalizing product and labor markets, lowering trade barriers, bringing more women into the workforce,and boosting investment in infrastructure.
“We are putting a number to it for the first time — putting a real number to what we are trying to achieve. We want to add over $2 trillion more in economic activity and tens of millions of new jobs,” Australian Treasurer Joe Hockey reportedly said. Similarly, U.S. Treasury Secretary Jack Lew said that “boosting growth and demand” topped the economic agenda at the meeting.
The main G-20 summit, which is scheduled for November, will see a detailed plan to achieve the goals agreed upon in Sydney, but there is widespread skepticism about a viable roadmap.
“Precisely how G-20 leaders plan to deliver on the Sydney promise to lift global GDP at least 2 percent by 2018 remains sketchy at best,” Societe Generale’s Michala Marcussen