topics
tools
Expatica countries
Index Last Var.(%)
BEL 20 2236.9 -1.49
DAX 6687.32 -1.49
IBEX 30 8800.1 -1.15
CAC 40 3382.85 -1.22
FTSE 100 5853.02 -0.72
AEX 320.45 -1.44
DJIA 12763.77 -0.98
Nasdaq 2901.7 -0.87
FTSE MIB 16428.94 -1.35
TSX Composite 12360.53 -1.10
ASX 4322.6 -0.79
Hang seng 20783.86 -1.08
Straits Times 2960 -0.71
ISEQ 20 501.21 -0.50
You are here: Home News News Focus G20 no quick fix for global economy: analysts

News Focus

archive
Enlarge font Decrease font Text size


03/04/2009G20 no quick fix for global economy: analysts

The huge cash injection of USD 1 trillion for the International Monetary Fund and other finance and trade institutions is unlikely to spark a global economic recovery, say analysts.

LONDON – The G20 London summit will unlikely spark an immediate global economic recovery, but a trillion-dollar funding boost for international lending institutions should help, analysts said.

The G20 meet, called to combat the burgeoning financial crisis and attended by US President Barack Obama, agreed a huge cash injection for the IMF and World Bank to help battle the spreading global recession.

But leaders from the Group of 20 industrialised and developing nations stopped short of any coordinated round of public spending.

"The summit has failed to break any new ground on a global fiscal stimulus," said Capital Economics analyst Julian Jessop.

"But there has at least been agreement on generous increases in funding for the IMF and additional trade credits."

Howard Wheeldon, senior strategist at BGC Brokers, lamented that the G20 package would not scoop the global economy out of recession – but could help prevent a deeper depression.

The G20 closing statement was "nothing that really softens the blow of recession – but perhaps some things that stops it moving to depression," he said.

The Group of 20 industrialised and developing nations will provide more USD 1 trillion (EUR 744 billion) of new resources for the International Monetary Fund and other global finance bodies.

There will be some USD 500 billion of funding, USD 250 billion in special drawing rights and USD 250 billion in trade credit.

G20 leaders want the extra cash to boost liquidity and help embattled countries – particularly in crisis-hit eastern Europe – through the global recession.

The new G20 measures unveiled Thursday will see secretive tax havens named and shamed, new rules on corporate pay, major reforms to the IMF and World Bank, a new push to pass free trade rules and the sale of huge gold reserves to help poor countries.

"G20 leaders have pushed forward on most key areas, promising to do whatever is necessary to restore global growth," said IHS Global Insight economist Jan Rudolph.

"The biggest surprise was the huge increase in IMF resources to around USD 1.0 trillion, which will go a long way to supporting financial stability in the developing world."

British Prime Minister Gordon Brown, hosting the summit, meanwhile boasted that the G20 will have spent USD 5.0 trillion by the end of 2010 on fiscal expansion in a bid to boost their battered economies.

And he insisted that the G20 were all agreed on doing whatever is needed to return the global economy to healthy growth.

"The issues that people thought divided us did not divide us at all. There was substantial agreement to do whatever is necessary to return to growth," Brown said.

In the run-up to Thursday, the United States and Britain had pushed for bigger stimulus spending – but it failed to materialise.

Nevertheless, VTB Capital analyst Andrey Kryuchenkov said that the IMF funding boost would help lift the struggling world economy.

"In the long run it is a positive development and would help global economic recovery," Kryuchenkov said.

"Some of this money could potentially filter through to eastern Europe, which should help to limit the economic fallout in eurozone and speed up the industrial recovery in Europe."

On a downbeat note, Rudolph said that the G20 communique failed to address the issue of purging the financial system of the toxic or high-risk assets that lay at the heart of the credit crunch.

"The weakest point of the deal is a lack of detail of how to deal with the urgent issue of cleansing banks of toxic assets, a problem that continues to choke the financial system and hamper credit flows," Rudoplh said.

"Without fixing the banks, a sustainable economic recovery is not possible.

"These matters, whilst recognised, have been left for individual countries to manage, but with no clear convincing road map yet formulated to restore a healthy banking system."

AFP / Expatica


0 reactions to this article

Be the first person to add a comment

General rating: Not rated yet

Rate article:    Add my rating


0 reactions to this article

Be the first person to add a comment
Discussion Forums

English in Belgium

ascent of language in belgium

Family in Belgium

Question about summer program/camp in Belgium

Healthcare in Belgium

How to find a good Physio and optometrist?

Jobs in Belgium

IFAs / FSIs / Country Managers / Confidential Introducers

Housing in Belgium

Flatmate Wanted as from mid February – SPACIOUS DUPLEX/PENTHOUSE

participate in the forums

Inside Expatica
Looking for work in Belgium

Looking for work in Belgium

This handy guide from Expertise in Labour Mobility includes how to write a CV, application procedure, interview dos and don'ts, Belgian management culture.

Practical, easy-to-use, free and... in English

Practical, easy-to-use, free and... in English

Belgium’s first alternative directory assistance services - available through the shortcode 14-14 - can now be accessed on the internet.

Finding a rental home in Belgium

Finding a rental home in Belgium

Moving to Belgium presents a host of challenges to expats, not least of all finding the right home.

Learning to cope with life abroad

Learning to cope with life abroad

The psychological effects of global mobility can be physically painful.