G-20�s initiative and global responsibilities
Ripan Kumar Biswas
Ripan.Biswas@yahoo.com
Showing stalled construction of Nakheel�s (Dubai based renowned real estate developer) plan to build four theme parks, including a SeaWorld centre in Palm Jabel Ali, Dubai, one of my civil engineer friends described how the global recession has hindered the grand construction sectors in Dubai and other Middle East countries.
Global economic recession is spreading gloom and despair everywhere. Although the 26bn euro ($35bn; �24.5bn) stimulus package for France's struggling economy was unveiled by President Nicolas Sarkozy in last December, but it did not go far enough. Even a further 2.4bn euro ($3.2bn; �2.3bn) of measures, including tax breaks and social benefits, presented by him after January's strike has failed to placate a new strike that occurred on March 18, 2009, mostly in transportation sectors, stalled the daily activities in about 200 towns around the country. Japan�s economy, on an upward trend for several years, has been hit badly by the global credit crisis. Retail sales fell and public sector borrowing rose in the UK. According to the business insurance comparator simplybusiness.co.uk, nearly a quarter of a million of Britain�s smallest businesses are at risk of failure, placing over 475,000 jobs in jeopardy.
Canada entered recession at the end of 2008, and the outlook for 2009 is likely to be worse, with the economy contracting by an estimated 1.5% to 2% for the year. The world is now into the first global recession since World War II as the crisis that started in the U.S. engulfs once-booming developing nations, confronting them with massive financial shortfalls that could turn the clock back on poverty reduction by years. But in light of optimism, US President Barack H Obama and British Prime Minister Gordon Brown, hoped and predicted that G-20 economic summit produced a significant global deal to tackle the deepening worldwide recession.
�We finished a very productive summit and that would be I believed a turning point in our pursuit a global economic recovery,� President Obama briefed reporters at the end of G-20 summit in London, England on Thursday, April 2, 2009. Leaders of the world's largest economies G-20 agreed to a package worth $1.1 trillion to tackle the global economic crisis. �The Group of 20 is taking "unprecedented steps" as the challenge is clear,� said Obama, who was under perhaps more pressure than anyone to show that the country where the crisis began can lead the way out.
Although investors around the world cheered a pledge by world leaders to step up efforts to fight the global economic downturn, but Obama warned they did not guarantee a swift return to economic growth. Global stocks shot up on Thursday amid greater optimism following a G-20 summit in London that boosted efforts to save the world economy and after an uptick in US manufacturing orders. Following the G-20 summit, London's leading stocks closed sharply higher. In Asia on Thursday, Japan's Nikkei index ended 6.8% lower and Hong Kong's main index fell more than 4%. Stock markets in Frankfurt and Paris also made gains, and in New York the Dow Jones closed up 2.8 per cent at 7,978.08.
With the allocated $1.1 trillion sanctions, the IMF's resources will be trebled from $250bn to $750bn and development banks such as the World Bank will receive an extra $100bn to lend to low-income countries. There will also be sanctions against secretive tax havens and tougher global financial regulation. According to the G-20 commitments, $250bn will be used to boost global trade. IMF will raise $6bn from selling gold reserves to increase lending for the poorest countries.
Asked if the measures taken by G-20 summit were enough to end the recession, President Obama said: "In life, there are no guarantees. In economics, there are no guarantees� there are always risks involved. But the patient has stabilized. There are still wounds that have to heal. There are still emergencies that can arise.� Relishing in the compliments of fellow world leaders, the British Prime Minister Gordon Brown added that the package alongside a global fiscal stimulus worth $5 trillion by the end of next year would double world growth to 4 per cent by 2010.
According to Nouriel Roubini, a business studies professor at New York University and columnist for Forbes.com, the United States economy is only halfway through a recession that started in December 2007 and will be the longest and most severe in the post-war period. U.S. gross domestic product will continue to contract throughout all of 2009 for a cumulative output loss of 5%. In 2009, Latin American countries will face a significant slowdown in economic growth. A combination of negative external shocks will slow down regional GDP growth to 0.8% in 2009. The United Kingdom economy is poised to shrink in 2009 with a -2.3% growth in real GDP. Russian output to contract by 2.5% to 3% in 2009 as manufacturing contracts and Russia's inflow-fueled consumption slows sharply. New Zealand may have a tougher time than Australia during the global recession, with GDP expected to contract 1% in 2009 after growing around 1% in 2008.
Asia faces a gloomy 2009 amid a G-7 recession. It can be predicted Asia's, excluding Japan, growth to slow down sharply to 3.8% in 2009. Hong Kong, Singapore and Taiwan will remain in recession through the first half of 2009, which might extend into third quarter 2009 while the ASEAN economies will slow significantly from the 2004-07 growth trends. China will experience a hard landing in 2009, with growth unlikely to exceed 5%, a sharp slowdown from the 10% average of the last five years. Given that the global recession will reduce demand for Middle East and North Africa's resource and non-resource exports, and the global liquidity crunch will reduce capital inflows, growth is expected to slow to an average of 3% in 2009 from almost 6% in 2008. Global growth will be flat around -0.5% in 2009.
The World Bank, on the other hand, cautioned that the cost of helping poorer nations in crisis would exceed the current financial resources of multilateral lenders. In a report, released ahead of G-20 summit of finance ministers in London last week, World Bank President Robert B. Zoellick, called on developed nations struggling with their economic routs to dedicate 0.7% of the money they spend on stimulus programs toward a Vulnerability Fund to help developing countries. Cambodia has lost 30,000 jobs in the garment industry while more than half a million jobs in India had been vanished in the last three months of 2008, including cuts in the gems, jewelry, and auto and textile industries.
�Important though G-20 nations are, representing 85% of world GDP, their voices are not enough to deal with this truly global problem,� British foreign office minister and the minister responsible for preparations for the G-20 Summit Lord Malloch-Brown said while he was welcoming the participation at the G-20 London Summit of the leaders of Association of South East Asian Nations.
Announcing the conclusions of the London summit, Prime Minister Gordon Brown said, �this is the day that the world came together to fight back against the global recession, not with words but with a plan for global recovery and reform and with a clear timetable." And if we agree with the President Obama�s quote that the world neither to give in to fear or to indulge in a blame game, we have enough reason to believe that every financial crisis comes to an end, so it will come to an end at some point just everybody has to pick up the pace.
Saturday, April 04, 2009, Dubai, UAE
Ripan Kumar Biswas is a freelance writer based in New York
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