an Eldis Resource
G-20 Mutual Assessment Process—alternative policy scenarios
Collective action would result in more balanced global growth and mitigated risk for the G20
Authors:
; IMF staff
Publisher:
International Monetary Fund , 2010
This report provides analysis of alternative policy scenarios to achieve strong, sustainable and balanced growth based on G-20 frameworks submitted for the Mutual Assessment Process. The paper illustrates two alternative scenarios—an upside and a downside case—to explore the potential benefits of further G-20 policy action to help deliver on their shared objectives.
The paper finds the following impacts for collective action:
- it would yield tangible and material benefit to the G-20 membership and the global economy; global growth would be appreciably stronger and employment gains would be significant across regions
- global growth would also be more balanced; in the upside scenario, stronger domestic demand in surplus countries is matched with deficit economies rebuilding saving on the back of stronger external demand
- it would also help mitigate risk—reducing prospects of a downside scenario that could inflict heavy costs
Consequently, upside gains and avoidance of downside losses would sum to much larger benefits. However, to advance progress toward meeting G-20 objectives, policies should be prioritised and tailored to the requirements and conditions of individual members. Therefore, the following key policy actions are recommended in the document:
- credible fiscal consolidation over the medium term, underpinned by high-quality measures of sufficient magnitude, should be a top priority in advanced deficit economies
- to reduce regulatory uncertainty, advanced economies should also accelerate financial repair and reform
- product and labour market reforms in advanced surplus economies should be friendly to demand, as well as supply
- in emerging surplus economies, policy should aim at enhancing social safety nets, reforming corporate governance, and developing financial markets
- in emerging deficit economies, policies should focus on simplifying product market regulation, improving infrastructure, and increasing efficiency of the formal sector
