Rising food, energy costs concern G20 - Manuel

Finance Minister Trevor Manuel on Sunday said these authorities are to continue to keep a close eye on inflation in the months to come.

He was addressing the G20 forum of leading industrialised countries and some developing countries, as they wrapped up their 2007 meeting hosted by South Africa with Minister Manuel as chair.

As outgoing host of the G20, South Africa – the only African member - has been playing an important role in the assessment of, and possible government interventions in, the global economic environment.

Comprising 19 of the world's most influential developed and emerging economies, representatives of the European Union and international financial institutions, the nine-year old G20 forum jointly represents over two-thirds of the world's population and over 90% of the world's gross domestic product.

Having taken over as chair of the G20 from Australia, which was host in 2006, South Africa now hands the baton over to Brazil, which takes over next year, followed by the United Kingdom in 2009.

As outgoing host, South Africa remains part of the G20 troika comprising also Brazil and the UK.

Briefing reporters on the G20's major meeting of 2007, Manuel, accompanied by Brazilian central bank governor Henrique de Campos Meirelles, said that the meeting was “fairly confident” of continued global economic growth.

However, the G20 members – which include the United States, China, Saudi Arabia, Turkey, Indonesia and Mexico – noted that “downside risks to the near-term outlook have increased as a consequence of recent financial market disturbances”.

At the same time, the meeting noted that emerging markets were relatively unscathed buy this turbulence, and that slower growth will also reduce the current pressure on capacity and resources.

Members agreed that an “orderly unwinding” of global imbalances, while sustaining global growth, is a “shared responsibility”.

Part of this unwinding involves steps to boost national saving in the US, progress on growth-enhancing reforms for Europe, more structural reform and fiscal consolidation in Japan, reforms to boost domestic demand in Asia and “greater exchange rate flexibility” in a number of countries with budget surpluses.

The meeting also called for “increased spending consistent with absorptive capacity and macroeconomic stability in oil-producing countries”.

Reducing poverty and inequality remained “enormous challenges” for the G20 forum, said Manuel on Sunday, particularly in the light of inflationary pressures, adding that the meeting's agenda focused on “real issues” relevant to the world's economy.

Members had a “challenging discussion” on the prices of commodities – including oil – without “beating up” on oil producers but rather focused on choices in biofuels, and the experiences in this regard of countries like Brazil, which is a leading producer of bio-ethanol.

Key questions centred on how to develop a better energy mix, and the potential impact of this on climate change as countries deal with these challenges, Manuel said.

The issue of biofuels took some attention, given that the realisation of the impact of biofuel on world food prices, causing further suffering for the world's poorest communities.

Recent “very significant” changes in energy and food prices have raised concerns globally, given the “profound impact” of these, said Manuel.

He said the matter of food being converted into biofuels remains a “difficult” issue, especially considering also the impact of climate change of grain production, such as wheat but also corn (maize) which is used also to feed cattle, causing further price rises.

“This is one of the areas that we are expressing deep concern about,” the Finance Minister said.

Better-coordinated decisions are needed to deal with imbalances such as these, he added.

President Thabo Mbeki also addressed the meeting earlier on Sunday, when he spoke of the need for a stronger democratic ethos in terms of transforming the world's global economic architecture, which is needed to reflect a changing world where emerging markets are playing a far larger role.

South Africa would work towards a new model of multilateralism in a manner that is “systematic” but which gives “due consideration” to all involved, he said.

Article published courtesy of BuaNews