G20, IMF ponder how to kickstart economic growth

Finance ministers, central bankers and other top officials from the G20 are meeting in Washington Friday as the International Monetary Fund and World Bank prepare for their spring meeting.

The G20 leaders and central bankers plan a news conference at 1 p.m. ET.

Financial leaders are concerned about stagnation of global economies, with growth predicted to be slow in Europe, Japan and other economies even six years after the financial crisis.

The exception might be the U.S., where the Fed may raise rates later this year. With easing in the EU and Canada, central bankers will be mapping new strategies to manage a U.S. rate rise, which could see money streaming toward the U.S. dollar.

The financial officials from the Group of 20 nations were expressing concerns about potential market instability once the Federal Reserve starts increasing a key interest rate which has been at a record low near zero since late 2008.

Also on the agenda were low oil prices, a soaring U.S. dollar and Greece's debt situation, which looks increasingly doubtful as it fails to agree to EU terms for renewed financing.

Turkey chairs G20

Treasury Secretary Jacob Lew and Federal Reserve Chair Janet Yellen were representing the United States at the meetings, which began with a dinner Thursday night and were to conclude with a news conference Friday afternoon. Deputy Prime Minister Ali Babacan of Turkey will sum up the group's discussions. Turkey holds the rotating chairmanship of the G20 this year.

The G20 talks were coming in advance of the spring meetings of the 188-nation International Monetary Fund and its sister lending organization, the World Bank.

On Friday, World Bank President Jim Yong Kim announced that the World Bank would give Guinea, Liberia and Sierra Leone an additional $650 million to help the three West African countries recover from the economic impact of the Ebola crisis.

The announcement came at an Ebola conference attended by the presidents of the three nations and U.N. Secretary-General Ban Ki-moon, who said that the full recovery from the Ebola crisis would only occur "when the outbreak has ended and safeguards have been put in place to prevent re-introduction of the disease."

Sluggish growth

The finance meetings were taking place at a time when much of the global economy remains stuck in a prolonged period of sluggish growth following the 2008 financial crisis and a recession that was the worst in seven decades.

IMF Managing Director Christine Lagarde told reporters Thursday: "The good news is that the global recovery continues. The not-so-good news is that growth remains moderate and uneven."

She said the goal of this week's talks was to produce a revamped action plan that will "prevent this new mediocre from becoming the new reality."

The IMF's latest economic forecast predicted only modest overall growth and downgraded the prospects for some nations including the United States, forecasting U.S. growth of just 3.1 per cent this year, a half-point lower than its January estimate. The reason: IMF economists believe the sharp rise in the value of the dollar will hurt American companies trying to export goods overseas.

Growth prospects in oil-exporting nations are being hurt by the big drop in oil prices over the past year, but those declines are expected to boost prospects in many oil-importing countries.

How to jumpstart growth?

The IMF this week also raised new concerns that severe volatility in financial markets could be triggered if the Federal Reserve moves, as is widely expected, to start raising interest rates later this year. If the Fed's rate hikes after a prolonged period of ultralow rates cause investors to rush for the exits, it could cause stock prices to tumble and interest rates to rise sharply.

Previewing the G-20 discussions, Babacan told reporters Thursday that the G-20 countries needed to do more to carry out commitments they made last year to jumpstart growth by investing in infrastructure projects and removing barriers to trade.

"Growth is there, but it is weak ... and uneven," he said. The finance ministers will produce an action plan that will be discussed by President Barack Obama and other G-20 leaders at a scheduled summit meeting in Turkey in November. The finance officials are trying to achieve the goal of boosting global economic output by more than $2 trillion over the next five years.

In addition to discussions on global growth, the finance officials will be seeking to keep an IMF-supported bailout for Greece on track. Worries that Greece may be unable to meet upcoming debt payments roiled markets this week. Greece is scheduled to make two payments of around 1 billion euros, or $1.06 billion, to the IMF next month.

Greek Finance Minister Yanis Varoufakis met with Lagarde on Thursday and in an appearance at a conference sponsored by the Brookings Institution promised to seek a compromise in the upcoming negotiations over bailout terms. But at the same time, he denounced some of the reforms being demanded by the country's European creditors and said that his new government had been elected to "challenge the logic of a program that has clearly failed."

However, German Finance Minister Wolfgang Schaeuble, speaking Thursday at the same conference, gave no sign that Germany is ready to back down from its demands that Greece fulfil the commitments it made to receive a 240-billion euro bailout in 2010 from its partners in the 18-country euro currency group and the IMF.