We met today to discuss recent developments in the world economy, strengthening the international financial system, the reform of the multilateral development banks, and measures to meet the challenges of international development. We also met with the Finance Minister and the Deputy Central Bank Governor of Russia and with representatives of the European Commission to discuss recent developments in the Russian economy.
Group of Seven economies
Although global growth has slowed over the past year, the foundations for economic expansion are sound. In fact, the prospects for improving the world standard of living are compelling. We are all dedicated to the proposition that it is in the interest of the world economy for each of our economies to grow closer to their potential. We agreed that we should be vigilant and forward looking in maintaining and implementing policies that promote strong productivity growth, including sound macroeconomic policy, structural reform, and international economic cooperation. We will work together to achieve the goal of free trade. We recognize that lower energy prices and stable oil markets are important.
In the United States, growth has slowed sharply. However, long-term economic fundamentals—productivity gains and factor market flexibility—remain strong. Monetary policy should continue to be aimed at contributing to sustained growth and maintaining price stability. Fiscal policy should also be targeted at bolstering long-term fundamentals.
Growth in Canada has also slowed; in the United Kingdom, the slowdown appears to be only moderate. In both countries, unemployment and inflation remain low. Policies should continue to support the foundations for sustained growth and employment over the medium term, while meeting inflation targets.
In the euro area, growth prospects have moderated, though remaining favorable. Policies should continue to emphasize strengthening potential growth and lowering unemployment through further structural reforms that increase the efficient operation of labor and product markets. Fiscal policy should aim to improve economic efficiency, notably through tax reform, while preserving the pace of the consolidation of public finances.
In Japan, economic activity has weakened, and prices continue to decline. Against this background, monetary policy should continue to provide ample liquidity until consumer price inflation stays at or above zero. Vigorous implementation of financial and corporate sector reforms is needed in order to support medium-term recovery.
We discussed developments in our exchange and financial markets. We reiterated our view that exchange rates among major currencies should reflect economic fundamentals. We will continue to monitor developments closely and to cooperate in exchange markets as appropriate.
Broader global economic developments
The slowing in the pace of global economic activity has also affected the prospects for growth in the emerging market and developing economies. In Asia, on the whole, after two years of strong growth, there are clear signs of a slowdown. Throughout the region, the implementation of structural reforms will be crucial to fostering strong, sustained growth. In Latin America, where growth also has slowed, structural measures are needed to raise productivity growth, and further fiscal consolidation is required to reduce financing requirements. In central and eastern Europe, reforms undertaken during the past few years have contributed to recent strong growth; fiscal consolidation and further structural reforms are needed to maintain performance. In Africa, although growth continues to rise, per capita incomes remain very low. Implementation of credible macroeconomic and structural adjustment remains a prerequisite for strong growth and broad-based poverty reduction.
We agree that free trade is an important driver of economic growth. Open markets can increase efficiency and productivity, thereby promoting development and poverty reduction in all countries. We strongly support efforts to launch a new World Trade Organization round this year, to reduce trade barriers in both industrial and developing countries. We also welcome industrial country initiatives that, by providing improved market access for exports from the poorest countries, will facilitate their integration into the world economy. It would be appropriate for the IMF and the World Bank to reflect on ways and means to facilitate trade liberalization.
We welcome Turkey’s strong economic reform program as a basis for Turkey to reach agreement with the IMF on a package that merits the continued support of the international community’s public and private sectors. We look forward to Turkey’s rigorous implementation of all these necessary measures. In this context, we welcome the decision of the IMF and the World Bank to provide additional assistance for the program.
We welcome the continued growth of the Russian economy and encourage the Russian authorities to step up the pace of economic reforms that are necessary for sound and sustainable economic development. Russia needs to take steps to create an economic environment conducive to investment, both foreign and domestic, such as enforcing the rule of law, promoting the free flow of information, attacking nonpayments and barter, strengthening the banking system, and improving corporate governance. We urge the Russian authorities to draw on the expertise of the IMF and the World Bank in addressing these issues. We welcome the ratification by the Duma of the Strasbourg anti-money-laundering convention and urge the Russian authorities to move quickly to remedy the deficiencies identified by the Financial Action Task Force in June 2000, in particular by passing a comprehensive anti-money laundering law. These steps would help facilitate Russia’s integration with the global economic system.
Crisis prevention, crisis resolution, and the IMF
We stress that strong and effective crisis prevention is a top priority. Both the IMF and individual countries should play key roles in this effort. Learning from previous experience, and with a view to forestalling crises, we resolve to monitor economic and financial developments more closely and to encourage early action to correct policies. In this context, we underscore the following:
Enhanced IMF surveillance is at the heart of crisis prevention. As part of this effort, the IMF should accelerate its work in developing and publishing indicators of national balance sheet and liquidity risk. The IMF should also further its work in building up and publishing macroprudential indicators for the financial sector.
We believe that implementation of internationally agreed standards and codes offers countries the opportunity to strengthen their basic infrastructure for growth and stability and to provide information to markets in a way that reinforces these goals. In this context, we encourage all countries to intensify their efforts, recognizing their different stages of development and institutional capacities, to meet international codes and standards and to publish their Reports on the Observance of Standards and Codes.