G20 nations warn of Brexit risk to global growth
CHENGDU, China — Britain’s vote to leave the European Union heightens risks for the world economy, finance chiefs from the G20 group of leading countries said Sunday at a meeting in China.
The outcome of last month’s referendum “adds to the uncertainty in the global economy,” the meeting’s host, Chinese finance minister Lou Jiwei, said after it concluded.
But he added that EU member countries were “well positioned to proactively address the potential economic and financial consequences stemming from the UK referendum.”
The issue has come to the forefront of the G20’s concerns at the meeting in Chengdu, the last before the grouping’s annual summit, to be held in the Chinese city of Hangzhou in September.
Ahead of the meeting the International Monetary Fund (IMF) downgraded its forecast for global growth this year, and officials in Chengdu said protracted talks between the EU and Britain over the departure could heighten risks.
“It won’t mean that they’ll get there in a week or a month. It’s a process that could take longer,” a senior US Treasury official told journalists on Saturday.
“The thing that would be very disruptive to confidence is if this becomes a highly confrontational process,” he said.
Britain’s new finance minister Philip Hammond on Saturday met his German counterpart Wolfgang Schaeuble and tweeted: “We agree we need a deal that works for the people of Britain & Germany.”
At a family photo on Sunday, Hammond was seated in the front row, but spent most of the event conversing only with one of his neighbors, World Bank president Jim Yong Kim.
‘More negative outcomes’
The IMF has expressed alarm over Britain’s looming departure from the EU.
“‘Brexit’ marks the materialization of an important downside risk to global growth,” IMF staff said in a report ahead of the meeting.
The IMF recently lowered its forecasts for global growth this year and next by 0.1 percentage point, to 3.1 percent and 3.4 percent respectively.
“But with ‘Brexit’ still very much unfolding, more negative outcomes are a distinct possibility,” the report said.
Other challenges threaten: a slowdown in the Chinese economy, as well as terrorist attacks and the failed coup in Turkey — which have rattled financial markets.
China’s economy, the world’s second largest, is caught in a fundamental transition to making domestic consumption the key driver instead of massive public spending and cheap exports.
Turkey’s Deputy Prime Minister Mehmet Simsek, who attended the meeting, said on Twitter that the attempted putsch against President Recep Tayyip Erdogan would not merit mention in the final communique.
At an earlier meeting in Chinese commercial hub Shanghai in February, the G20 finance chiefs agreed to use “all policy tools” including monetary easing, fiscal spending and structural change to boost growth.
The IMF has called on some countries, notably Germany and the United States, to boost spending on infrastructure, which has been opposed by Berlin.
“The world economy is beleaguered with many serious problems,” China’s Lou said on Saturday.
“We should make monetary policy more forward-looking and transparent, enhance the effectiveness of fiscal policy… so as to support stronger recovery of the world economy.”/rga
Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.