response of the g20 to the global financial crisis
TRANSCRIPT
Response of the G20 to the Global Financial Crisis
Turalay Kenc Deputy Governor
CBRT-ECB Joint Conference Balanced and Sustainable Growth – Operationalising the G20 Framework
27 August 2015, Frankfurt am Main
The G20’s response in the aftermath of the global financial crisis of 2008-2009.
In the aftermath of the global financial crisis (GFC) of 2008-2009 the G20 was effective in
(i) stabilizing financial markets and
(ii) launching a global economic stimulus • “…the largest and most coordinated fiscal and monetary stimulus
ever undertaken…”
The G20 succeeded in averting the possibility of an economic depression.
2
A long-term response of the G20 to the global financial crisis of 2008-2009.
The global financial crisis of 2008-2009 warranted coordinated economic policies for
• strong growth,
• a much stronger framework to correct global imbalances,
• sound commitments to ensure that global growth is sustainable and
• a safer, more resilient source of finance.
The G20 responded convincingly by • launching the “Framework for Strong, Sustainable and Balanced
Growth [SSB]” at the Pittsburgh Summit in 2009;
• gradually strengthening the scope and governance of the framework through new commitments; and
• coordinating the fundamental overhaul of international financial regulatory standards.
3
A long-term response of the G20 to the global financial crisis of 2008-2009.
G20 policy coordination is to ensure that fiscal, monetary, trade and structural policies are collectively consistent and lead to SSB growth.
The governance: Mutual Assessment Process (MAP).
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Mutual Assessment Process
2009 Pittsburgh
• MAP launched
• «…a cooperative process of mutual assessment of our policy
frameworks and the implications of those frameworks for the pattern
and sustainability of global growth.»
2010 Seoul
• Enhanced MAP • External sustainability is promoted
• Indicative Guidelines
• Accountability Assessment • Maintaining G20 credibility : «Comply or explain approach»
2012 Los Cabos
• Enhanced Accountability Assessment • Peer review
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ESM
A Comparison between the G20 and the EU Governance Frameworks
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Prevention and
correction of macro
imbalances
New surveillance
procedure and
possible sanctions
Better enforcement of
rules
-Larger range of sanctions,
starting more gradual, quasi-
automaticity (RQMV)
-Strengthened national fiscal
frameworks
More effective
preventive arm of SGP
- Expenditure benchmark
- Draft Budget Plans
- Autonomous recommendations
Focus on debt
developments
Numerical benchmark in the
corrective arm of the SGP
Structural reforms
Europe 2020 strategy
Price stability ECB
- LTRO
- OMT
- Forward guidance
Fiscal compact
Crisis
Resolution EFSM/EFSF/ ESM Financial
Stability
Sound Fiscal Policy
Sustained Economic Growth
Banking Union •Based on a single rule book for the EU 28 •Single Supervisory Mechanism •Single Resolution Mechanism
European Semester
for economic policy coordination
The Assessment of the G20’s Response.
Has response of the G20 to the GFC succeeded in achieving the SSB growth aim?
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-1
0
1
2
3
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20
03
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20
09
20
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20
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20
12
20
13
20
14
20
15
(f)
1990-2006 Average
Source: IMF WEO July 2015
World Output Growth (%)
Weak Recovery…
8
-6
-4
-2
0
2
4
6
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
12 years
Source: OECD Long-term baseline projections 2014
Global Output Gap (%)
…And Still Ongoing Recovery.
4 years 2 years
The Assessment of the G20’s Response.
Has the G20’s response to the GFC succeeded in achieving the SSB growth aim?
Answer for the strong growth aim:
• We have not achieved a strong global growth rate yet.
10
Source: WB WDI
* Gross capital formation in 2014 is computed by using 5-year average growth rate.
World Gross Capital Formation (% of GDP)
Investment level has been low in the post-global crisis era.
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20
21
22
23
24
25
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
Source : IMF WEO April 2015
* Average unemployment rate of Argentina, Brazil, China, Indonesia, S. Korea, Mexico, Russia, S.Africa, Turkey
Unemployment Rates (%)
Unemployment rate is declining, but still higher than the pre-crisis levels for AEs
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4
5
6
7
8
9
10
11
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
EMEs*
AEs
Source: The Conference Board
Average Total Factor Productivity Growth (%)
Productivity growth has been low since the crisis with no signs of strengthening in the near future.
13
-1,0
-0,5
0,0
0,5
1,0
1,5
Aes EMEs World
1990-2007
2010-2013
2014
Source: The Conference Board
GDP per Person Employed (%)
Labor productivity growth is also declining.
14
-2,0
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
-2,0
-1,0
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f
AEs
World
EMEs
The Assessment of the G20’s Response.
Has the G20’s response to the GFC succeeded in achieving the SSB growth aim?
Answer for the sustainable growth aim:
• Global growth does not seem to be sustainable yet.
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Global imbalances are narrower compared to the pre-crisis
period…
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Source: IMF
-60
-40
-20
0
20
40
60
80
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
f
Euro Area United States United Kingdom Turkey South Africa Saudi ArabiaRussia Mexico Korea Japan Indonesia IndiaChina Canada Brazil Australia Argentina
Current Account Balance (%GDP)
….in both deficit and surplus G20 countries.
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Source: IMF WEO April 2015, CBRT Calculations
Note: The differnce between post-criss averages of current account balances and pre-crisis averages of current account balances
-1,4
-1,2
-1
-0,8
-0,6
-0,4
-0,2
0
Change in Surplus Countries(Post-crisis vs. Pre-crisis averages %)
Change in Deficit Countries(Post-crisis vs. Pre-crisis averages %)
Change in Current Account Balance (%GDP)
However, role of demand compression is higher
Expenditure Switching? Expenditure Reduction?
Source: IMF WEO October 2014
Reference: Aslam A., S. Beidas-Strom, M.E. Terrones and Yepez J. (2014), «Global Imbalances: Whither now?», www.voxeu.org
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y = -0,2043x + 0,4315 -10
-5
0
5
10
15
-100 -50 0 50
Ch
ange
in C
AB
, 20
06
–20
13
(%
G
DP
)
Relative Domestic Demand Growth (2006-2013)
y = -0,1648x + 1,2434 -10
-5
0
5
10
15
-20 0 20 40
Ch
ange
in C
AB
, 20
06
–20
13
(%
G
DP
)
Change in REER (2006-2013)
Source: IMF IFS
Net International Invesment Positions (Thousands $)
…and not much improvement in stock balances
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-5.000
-4.000
-3.000
-2.000
-1.000
0
1.000
2.000
3.000
4.000
2007 2008 2009 2010 2011 2012 2013
Argentina Australia Brazil Canada China Euro Area France Germany India Indonesia
Italy Japan Korea Mexico Russia S.Arabia S.Africa Turkey UK USA
The Assessment of the G20 Response.
Has the G20 response to the GFC succeeded in achieving the SSB growth aim?
Answer for the balanced growth aim:
• It is fair to say that there still exists global imbalances.
Overall, there have been improvements in the global economy.
However, we are still far from the G20’s aim of achieving Strong,
Sustainable and Balanced Growth.
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What can be done in order to make response of the G20 successful?
Further fiscal, monetary, trade and structural policies?
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Source: Bloomberg
Balance Sheets of Major Central Banks (2008=100)
Room for manoeuvre is limited for monetary policies in AEs: Balance sheet policies.
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50
100
150
200
250
300
350
400
450
500
550
FED
ECB
BoE
BoJ
Source : IMF IFS, Bloomberg
Policy Rates (%)
Room for manoeuvre is limited for monetary policies in AEs: Interest Rate Policies.
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0,00
1,00
2,00
3,00
4,00
5,00
6,00
7,002
00
7 J
an
20
07
Ju
l
20
08
Jan
20
08
Ju
l
20
09
Jan
20
09
Ju
l
20
10
Jan
20
10
Ju
l
20
11
Jan
20
11
Ju
l
20
12
Jan
20
12
Ju
l
20
13
Jan
20
13
Ju
l
20
14
Jan
20
14
Ju
l
20
15
Jan
UK
USA
Euro Area
Japan
Source : IMF WEO April 2015
Goverment Gross Debt (% GDP)
Fiscal policy could be utilized if there is space without jeopardizing the sustainability of Debt/GDP ratios
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0
20
40
60
80
100
120
20
01
20
02
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20
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16
20
17
20
18
20
19
20
20
AEs
EMEs
Source: CPB World Trade Monitor
Global Trade Growth (yoy)
Slower global trade growth in the post-GFC era.
25
-20
-15
-10
-5
0
5
10
15
20
19
92
19
93
19
94
19
95
19
96
19
97
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98
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99
20
00
20
01
20
02
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20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Global Trade Growth (3 months movingaverage)1997-2007 Global Trade Growth Average
What can be done in order to make the G20 response successful?
Structural reforms!
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Launch of Growth Strategies (GSs)
2013
St.
Petersburg
• Decided on Comprehensive GSs:
• «We ask our Finance Ministers to develop further the comprehensive
growth strategies for presentation to the Brisbane Summit»
2014
Australia
• Launched GSs with the aim of “boosting growth and jobs”
• Focus Areas: Trade, Investment, Competition, Employment
• Final Objective: Raising the level of G20 GDP by more than 2
percent in 5 years (2 in 5)
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Source: OECD Assessments
GSs: 1000+ commitments
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1000+ structural reform commitments on 4 thematic areas
Breakdown of Structural Reform Commitments (2014)
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Investment 27%
Employment 29%
Competition 16%
Trade 14%
Others 14%
Outcome of GSs in 2014
‘Analysis by the IMF-OECD indicates that our
commitments, if fully implemented, will deliver 2.1
per cent. This will add more than US$2 trillion to the
global economy and create millions of jobs.’
(G20 Brisbane Leaders’ Summit, 15-16 November 2014)
Source: «Modelling the Impact of Structural Reforms and Their International Spillovers», IMF Research Department, Economic Modelling Division, June 2015 Seminar on «Assessing the Impact of Structural Reforms»
Estimated Impact of GSs on G20 GDP Growth
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Three Pillars of the 2015 Turkish Presidency Agenda
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Priorities of the Turkish G20 Presidency
Three I’s of the Agenda
Implementation Inclusiveness Investment
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First I: Implementation
2014 Brisbane Summit
• «We will monitor and hold each other to account for implementing our commitments…»
2015
Turkish Presidency
• A robust framework to monitor the implementation of GSs
• Adjustment of GSs
2015
Monitoring Mechanism
• Brisbane Commitments : Detailed Monitoring • 5-8 commitments that have highest growth impact
• Other Commitments: Including Pre-Brisbane & fiscal commitments
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Second I: Inclusiveness
To unlock the potential of SMEs as to stimulate economic
growth.
Launch of the World SME Forum (WSF) in Istanbul in May 2015.
G20/OECD high level principles on SME financing to be delivered
by the Antalya Summit.
Reducing gender inequality and youth unemployment via labour
and product markets reforms in GSs.
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Third I: Investment
Country specific investment strategies and aggregate
investment ambition to be finalized by the Antalya Summit
• Focus areas: Ecosystem, infrastructure and SME financing
• Increase the overall level of investments, especially through private
sector participation
• Improve the efficiency of public sector capital expenditures.
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Conclusion
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The premier forum for global economic policy coordination.
Successful GFC management.
The framework for SSB growth to address the root causes.
With limited success and spaces structural reforms have become important
to raise potential growth.
The Turkish presidency: inclusive and robust global growth through
collective action with a view to lift the potential of the global economy..
Continued policy coordination and cooperation will be a key test of the
G20’s effectiveness.
THANK YOU