MOSCOW – Following are key sections of a draft communique prepared for G20 finance ministers and central bankers meeting in Moscow, which was obtained by Reuters.
1. We the G20 Finance Ministers and Central Bank Governors, met to discuss the current global economic developments and prepare for our Leaders' summit in September.
2. Since we last met, the global outlook has somewhat weakened on account of slower growth in some large emerging market economies and the recession in the euro area. As previously, the global recovery remains fragile and uneven, with unemployment continuing to be high in many countries. A range of factors continue to weigh on global growth prospects, including post-financial crisis deleveraging in the private sector and impaired credit intermediation, fiscal drag and still incomplete rebalancing of global demand, as well as structural impediments to growth in some countries.
In addition, policy uncertainty has recently triggered an increase in financial markets volatility and financial conditions have tightened. This has mostly affected emerging market economies, and some of them experienced a large increase in local bond yields, depreciation of currencies and liquidity pressures against the backdrop of reversing capital flows.
3. To address these challenges and to place the global economy on a path to stronger, more sustainable and more balanced growth, we are building on our recent policy actions by developing a comprehensive St. Petersburg Action Plan.
We agreed that the first priority of the Action Plan is to address the near term challenges, including the need to boost jobs and growth, by continuing to reduce financial market fragmentation, accelerating banking reforms in Europe, continuing monetary support where appropriate, calibrating the pace of fiscal consolidation to demand conditions where conditions allow and provided concerns about medium-term fiscal sustainability are addressed, and allowing exchange rates to adjust to fundamentals.
We agreed that to boost jobs and growth over the medium term, the St. Petersburg Action Plan must include a comprehensive series of structural reforms that will increase labor force participation, employment and productivity. To this end, we have reviewed our structural reforms agenda and agreed to address the gaps in our commitments with reforms that clearly contribute to our collective objectives of strong, sustainable and balanced growth.
4. Achieving a stronger and sustainable recovery and fiscal sustainability in advanced economies remains critical. As agreed we are making progress in developing credible, country specific and ambitious medium-term fiscal strategies for the St. Petersburg Summit. These strategies will be implemented flexibly, taking into account near-term economic conditions so as to put debt as a share of GDP on a sustainable path and strengthen economic growth and job creation.
5. We are determined to continue progress with rebalancing of global demand, which requires internal rebalancing through structural reforms and exchange rate flexibility. We reiterate our commitments to move more rapidly toward more market-oriented exchange rate systems and to refrain from competitive devaluation. We will resist all forms of protectionism and keep our markets open. Large surplus economies should consider taking further steps to boost domestic sources of growth, while deficit economies should implement measures to improve competitiveness.
6. Monetary policy should be directed toward domestic price stability and continuing to support economic recovery according to the respective mandates of central banks. We continue to be mindful of unintended negative side effects stemming from extended periods of monetary easing. We reiterate that excess volatility of capital flows and disorderly movements in exchange rates have adverse implications for economic and financial stability.
(Reporting By Jan Strupczewski)