Global growth remains fragile

WASHINGTON, DC – Global growth remains fragile and timid for this year on the back of volatile oil prices and possible renewed tensions in the euro zone.

Fiscal adjustment programs, the readiness of financing and infrastructure investments are needed to propel growth further, a group said on the sidelines of the World Bank Group and International Monetary Fund (IMF) Spring Meetings here.

“The pace of global growth remains subdued and uncertain, with adverse impact on growth in many emerging markets and developing countries,” the Intergovernmental Group of 24 (G-24) on International Monetary Affairs and Development said in a statement.

“Recent policy actions have reduced immediate threats arising from the euro area crisis but downside risks remain high, including from possible renewed tensions in the Euro area and from high and volatile oil prices,” the group said.

The G-24, in which the Philippines was represented by National Treasurer Roberto Tan, met on the sidelines of the World Bank Group and IMF Spring Meetings.

Despite some recent improvement, G-24 said they are still concerned about the fragility of the global economic recovery.

In the World Economic Outlook (WEO), the IMF said global output is seen to grow by 3.5 percent and 4.1 percent in 2012 and 2013, respectively, from 3.3 percent and 3.9 percent in the January WEO update and four percent and 4.5 percent forecast in September last year.

The group said “we believe that immediate action and concerted actions are needed to restore confidence.”

 “Specifically, advanced economies should follow through actions to restore stability and implement fiscal adjustments to strengthen confidence in debt sustainability,” the group said.

To date, the 17-member euro zone is hampered by a debt crisis in members like Greece, Spain and Italy.

“We call for a careful monitoring of the deleveraging by Euro area banks to ensure that it does not have an adverse impact on the availability of finance for emerging markets and developing countries,” the group said.

European banks are conducting a deleveraging program that seeps foreign capital out of emerging markets.

In terms of the role of international financial institutions, the IMF should have additional funds to support ailing economies.

“We welcome ongoing efforts to ensure that the IMF has the necessary resources to play its appropriate role in responding to heightened risks in the global economy and help meet the need of all members that may be affected,” the group said.

So far, there are firm commitments from numerous member-countries to increase resources made available to the IMF by more than $430 billion.

Furthermore, G-24 said it supports the World Bank’s promotion of social safety nets and social protection.

The World Bank is calling on countries to expand safety nets like cash transfers, food assistance, public works programs, and fee waivers.

Lastly, infrastructure is a key to sustainable development in the long run.

“We believe that realizing the growth potential for our economies and meeting our crucial development, inclusion and environmental goals will require a step increase in investment in infrastructure over the next few decades,” G-24 said.

Specifically, enhanced public-private partnerships (PPPs) can make a significant contribution to the infrastructure sector, in which the IMF’s International Finance Corp. can also engage into.

The PPP, a list of some 80 projects worth nearly P740 billion, is the flagship project of the Philippine government. In December, the Ayala Group bagged the P2-billion Daang Hari-South Luzon Expressway Link Road, the first PPP to be bid out by the government.

The next meeting of G-24, which is held twice every year, is set on October 10 at the sidelines of the World Bank-IMF Annual Meetings in Tokyo, Japan.