G20 policymakers are likely to maintain their pledge to keep economic life-support packages in place until recovery is assured when they meet this weekend, a UK government source said on Wednesday. Finance ministers and central bankers from the Group of 20 club of rich and developing nations will gather in St Andrews in Scotland on Friday and Saturday to follow up on agreements made at a leaders' summit in Pittsburgh in September.
Since then, more signs have emerged that the world is coming out of the worst synchronised downturn since the World War 2 though some countries like Britain have still not shown a return to growth. But the source said it was probably still too early to start withdrawing the extraordinary support measures that countries have put into their economies over the last year.
"We are not yet back to trend growth levels," the source said. "I expect we will have the same language as in Pittsburgh, that the current support measures need to be kept in place until recovery is well secured." Policymakers will, however, discuss how they can co-ordinate or exchange information on eventual strategies from withdrawing the stimulus, alongside talks on how to establish a framework for more balanced global growth and climate finance initiatives.
"There will be a set of discussions about how we're going to sequence all this as governments think about moving from a period of stress and so forth to a period that's steadier and more regularised and as some of these extraordinary measures which the G20 countries took become less necessary," US Deputy Treasury Secretary Neal Wolin said in Johannesburg.
Wolin added, however, that for now the focus would be to continue pushing stimulus. Asked if the weakness of the dollar would be an issue for the G20 meeting, the source said: "The currency issue is always there", but added that it was not on the formal G20 agenda.
The two main issues are expected to be establishing how the framework for growth agreed in Pittsburgh would actually work and climate finance ahead of an environment summit in Copenhagen. The Danish Prime Minister will attend the Scotland meeting. Countries are expected to sign up to a process where they submit their own projections for their economies which will then be assessed by the International Monetary Fund to see if they are compatible with each other and if not what policy changes would be required, which would be discussed by the G20.
The country projections will not just focus on current account imbalances, the source said, but on several variables such as components of aggregate demand or public finances. On climate finance, policymakers will discuss not only the cost but also governance issues of funding is channelled to low income countries, for example.
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