G20 set for tension

Johannesburg - The gradual easing of economic stimulus plans could prove to be a source of tension between the G20 group of nations, said economists.

Stimulus packages have ranged from slashing interest rates to government spending on infrastructure projects in an effort to stave off the sharpest economic downturn in over a decade.

The financial heads from the 20 wealthiest nations, who met in London over the weekend, decided that strategies to lifting these stimuli and their timing will be nation-specific.

However, Chris Hart, economist at Investment Solutions, said that the easing of stimulus measures would need to be done in a synchronised manner.

"For example, interest rates would need to start increasing at more or less the same time in order to avoid distorting the forex [foreign exchange] market," said Hart.

"There's already quite a divide among the G20 countries," he said.

He added that the US and the UK, which had applied some of the biggest stimulus packages, were less eager to begin easing compared to the remainder of the group, which had been more conservative.

One of the cornerstones of US stimulus measures has been the $787bn package approved in February 2009. In the UK, a $30bn stimulus package was announced late in 2008.

Glynos spoke to Chris Gibbons on Fin24.com's AM Stock Take on Monday.

"However, we need to be prepared for a very long and drawn-out process, which could take the better part of a decade," he added.

"I don't think this kind of fiscal stimulation can be withdrawn any time soon, especially not with tax receipts down and economies struggling."

- Fin24.com