Adjust monetary settings with care, US urged
MANILA, Philippines—The world’s emerging markets have called on policymakers in advanced economies to proceed with more care in adjusting their monetary settings to avoid upsetting growth in countries that represent the bulk of the global population.
A statement by the Intergovernmental Group of 24 on International Monetary Affairs and Development, or G24, of which the Philippines is part, said major economies should be mindful of “spillover effects” that may lead to slower growth in emerging markets.
The G24 took special note of economies like the United States, which issues the dollar, the world’s most used currency.
“We urge policymakers, especially in countries that issue reserve currencies, to pursue multilaterally coordinated actions to mitigate adverse spillover effects of monetary policy, including through effective communication,” a G24 statement released at the weekend read.
The G24 said growth in emerging markets was expected to moderate this year as a result of tighter financing conditions, caused by the unwinding of accommodative monetary policy measures, particularly in the US.
This comes amid improving economic conditions in the US, prompting the US Federal Reserve’s decision to scale back its monthly asset purchases at the start of the year.
Last week’s statement followed the first of the G24’s two meetings this year. This coincided with the International Monetary Fund’s (IMF) Spring Meetings in Washington DC. Other Asian members of the G24 include India, Iran, Pakistan, Sri Lanka and Syria. China is also represented as a “special invitee.”
Apart from calibrating policy adjustments more carefully, advanced economies were also urged to work harder to spur their own domestic markets, which in turn would lead to higher demand for products from the smaller countries.
“At the same time, AEs must do more to stimulate global demand and facilitate rebalancing,” the G24 said.
“We note that the economic outlook for emerging markets and developing countries will be less favorable than in the past because of tighter financing conditions (and) geopolitical tensions,” the statement read.
The deceleration in growth will also come as a result of slower actual and lower potential growth than before the crisis in advanced economies, the G24 said.
“Against this backdrop, we are committed to boosting domestic sources of growth and tapping opportunities for trade and investment among ourselves,” it said.
The IMF in its World Economic Outlook (WEO) released last week trimmed its outlook for global growth to 3.6 percent from 3.7 percent.
