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Oil price fall allows states to ‘reassess fiscal policies’: G20

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The recent sharp decline in oil prices will provide “some boost” to global growth and should allow states to “reassess” fiscal policies to sustain economic activity, the G20 leading economies said in a draft communique Tuesday.

“The fall in oil prices will provide countries with an opportunity to reassess their fiscal policies,” finance ministers and central bank chiefs from the group said in their draft statement.

It said that fiscal policy “has an essential role” in building confidence and sustaining domestic demand.

At their meeting in Istanbul, the G20 have sought ways to boost faltering global growth against the background of the debt crisis in eurozone member Greece.

The statement did not specifically mention Greece, which is not a member of the G20.

While the oil price fall will cause some boost in global growth, the implications will be different for oil exporting and oil importing countries, it said.

The decline will increase the purchasing power of oil importing economies and “could exert downward pressure on inflation, though temporarily”.

However, it said the outlook for oil prices remains “uncertain”.

“We will continue to closely monitor developments in commodity markets and their impact on the global economy.”

“In some countries, potential growth has declined, demand continues to be weak, the outlook for jobs is still bleak, and income inequality is rising,” the communique said.

It said that growth in the global economy remains “uneven” and the recovery “slow” especially in the eurozone and Japan, as well as some emerging market economies.

“To this end, we will continue to assess major risks in the global economy and remain vigilant,” the finance chiefs said.

They also warned of the risk of stagnation in some leading economies.

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