G20 Indicative Guidelines for Assessing Persistently Large
1. Our aim is to promote external sustainability and ensure
that G20 members pursue the full range of policies required to
reduce excessive imbalances and maintain current account
imbalances at sustainable levels.
2. In February we agreed on a set of indicators that will allow
us to focus through an integrated 2-step process on those
persistently large imbalances that require policy action. These
indicators are (i) public debt and fiscal deficits; and private
savings rate and private debt (ii) and the external imbalance
composed of the trade balance and net investment income flows
and transfers, whilst taking due consideration of exchange
rate, fiscal, monetary and other policies.
3. To complete the first step, we have agreed today on
indicative guidelines against which each of these indicators
will be assessed. While not policy targets, these guidelines
establish reference values for each available indicator
allowing for identification of countries for the second step
in-depth assessment. Four approaches will be used:
1. A structural approach, which is based on economic models and
grounded in economic theory, which benchmarks G20 members
against each indicator in a way that takes into account
specific circumstances including large commodity producers
(e.g. its demographic profile, oil balance or trend growth).
2. A statistical approach which benchmarks G20 countries on the
basis of their national historical trends.
3. A statistical approach which benchmarks G20 country's
historical indicators against groups of countries at similar
stages in their development.
4. A statistical approach which draws on data, benchmarking G20
country's indicators against the full G20.
4. Statistical approaches are based on the 1990 to 2004
period, as this is the period that preceded the large build
up in external imbalances. Reference values drawn from
1990-2010 were also provided as a complement. In all four
approaches, forecast figures over the 2013-15 period are
compared to the values suggested by the guidelines to determine
whether or not an in depth assessment should be undertaken.
Those countries identified by at least two of the four
approaches as having persistently large imbalances will be
assessed in-depth to determine in a second step the nature and
root causes of their imbalances and to identify impediments to
adjustment. In carrying out this assessment, we will take due
account of the exchange rate and monetary policy frameworks of
members. For members of the euro area with its governance
framework, this assessment will involve the appropriate
authorities. National circumstances will also be taken into
account. In the second step assessment, the independent IMF
analysis will rely on IMF forecast data, while countries' own
assessments can use national data.
5. For the identification of countries that will move into the
second stage, the selection rules for G20 countries accounting
for more than 5 % of G20 GDP (on market exchange rates or PPP
exchange rates) will reflect the greater potential for
spillover effects from larger economies.