G-20 leaders to secure fragile economies

G-20 leaders to secure fragile economies
Prime Minister Lee of Singapore.

RUSSIA - IT HAS been a long road from Pittsburgh to St Petersburg.

Back in the dog days of 2009, when the world's financial system seemed to be in freefall, leaders from the G-20 countries gathered in the old steel-producing town of Pittsburgh in Pennsylvania, United States, to try to figure out a way to save the world from financial meltdown.

That meeting bolstered confidence that these leaders, who account for two-thirds of the world's people and 90 per cent of its gross domestic product, were prepared to do what it would take to fix the problems, and so staved off a collapse of the world's banking system.

The reforms and austerity that followed caused considerable pain for many, but it helped put the world economy back on the path to recovery.

Little wonder then that US officials, speaking to reporters ahead of the G-20 summit that kicks off today here in St Petersburg, Russia, point airily to the "arc from Pittsburgh to Petersburg".

"As we approach St Petersburg, the US economy is in the strongest position of any time since the G-20 began, while also achieving considerable fiscal consolidation. The economy has now expanded for four years, with private demand growth averaging 3 per cent in recent years, and private employers have added more than seven million jobs," a senior US official said.

But, the official added: "While global growth is improving, it remains weak. G-20 members need to boost domestic demand and create jobs. This is our top priority in St Petersburg."

Europe has shown tentative signs of pulling out of recession, while in Japan the "Abenomics" reforms of Prime Minister Shinzo Abe are also helping to pull his country out of its long years of deflation.

Ironically, though, signs of progress in the US economy are giving rise to new concerns. Emerging-market countries, from India to Indonesia, South Africa and Brazil, are all reeling from recent turmoil in financial markets.

This has been set off by fears that since the US is growing faster than some expected, the US Federal Reserve might soon wind down its massive US$85 billion (S$109 billion) a month bond purchases to kick-start the American economy.

Of course, everyone knew that these measures could not go on forever. At some point, the flow of cheap government funds would have to be reversed and rescinded. But few paid much attention to just how or when this might be done. Until now.

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