G20 says economy recovering but no end to crisis yet

Fri Sep 6, 2013 11:25am EDT
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By Lidia Kelly and Luke Baker

ST. PETERSBURG, Russia (Reuters) - The Group of 20 powers said on Friday the world economy was improving but it was too early to declare an end to crisis with emerging markets facing increasing volatility.

The prospect that the Federal Reserve may rein in its expansive monetary policies as soon as this month has plunged into turmoil some emerging economies that had enjoyed rapid growth helped by a flood of cheap dollars.

In talks on the economy which were overshadowed by the Syrian crisis and which were described as "difficult" by participants, emerging and developed powers in St. Petersburg managed to find a common form of words.

Leaders of the G20 - which accounts for 90 percent of the world economy and two-thirds of its population - agreed to adjust policy carefully but said countries at the sharp end also had to put their houses in order.

A communique issued at the end of the two-day summit stuck closely to the statement issued by finance ministers in July, demanding changes to monetary policy must be "carefully calibrated and clearly communicated".

International Monetary Fund Christine Lagarde welcomed that commitment, adding: "Both advanced economies and emerging markets will have to address their domestic challenges in order for spillovers to be effectively managed."

The G20, which united in response to global crisis in 2009, now faces a multi-speed recovery with the U.S. economy pushing ahead, Europe maybe finding a floor and developing economies facing blowback from the looming 'taper' by the Fed.

The nod in the communique to managing "spillovers" of policy shifts was the closest countries like India got to an acknowledgement of their plight.   Continued...

Russian President Vladimir Putin (R) and German Chancellor Angela Merkel talk as they watch a fragment from the ballet "Ruslan and Lyudmila" during the G20 Summit in Peterhof near St. Petersburg September 6, 2013. REUTERS/Michael Klimentyev/RIA Novosti/Pool