G20 warn of Brexit risk to global growth
BRITAIN’S vote to leave the European Union heightens risks for the world economy, finance chiefs from the G20 group of leading countries said yesterday.
The outcome of last month’s referendum “adds to the uncertainty in the global economy”, they said in a communiqué after a meeting in China.
But they insisted that EU member countries were “well positioned to proactively address the potential economic and financial consequences” of the vote, adding, “In the future, we hope to see the UK as a close partner of the EU.”
The G20 cited several other factors complicating the global economic environment, among them “geopolitical conflicts, terrorism and refugee flows”.
But participants said Brexit was at the forefront of concerns at the meeting in Chengdu, the last before the grouping’s annual summit in the Chinese city of Hangzhou in September.
Britain’s finance minister Philip Hammond – who was seated in the front row of a group photo yesterday – told reporters the subject had come up “a great deal”.
“The reality is there will be a measure of uncertainty continuing right up to the conclusion of our negotiations with the EU,” he said.
Before the meeting, the International Monetary Fund (IMF) downgraded its forecasts for global growth this year and next by 0.1 percentage point, to 3.1 percent and 3.4pc respectively.
“Brexit marks the materialisation of an important downside risk to global growth,” IMF staff said in a report ahead of the meeting, adding that as it was “still very much unfolding, more negative outcomes are a distinct possibility”.
Officials in Chengdu said protracted or acrimonious talks between the EU and Britain over the departure could heighten the dangers.
“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 July 23.
“The thing that would be very disruptive to confidence is if this becomes a highly confrontational process,” he said.
Other challenges threaten: a slowdown in the Chinese economy, as well as terrorist attacks and the failed coup in Turkey.
Earlier this month 84 people were killed in the French Riviera city of Nice when a Tunisian truck driver – suspected to be inspired by the Islamic State jihadist group – ploughed a 19-tonne vehicle through a holiday crowd.
Last week a German-Iranian gunman – believed not to be connected to the Islamic State group but “obsessed” with mass killers – shot dead nine people in the German city of Munich before killing himself.
“We condemn, in the strongest possible terms, the recent terrorist attacks,” the communiqué said. “We reaffirm our solidarity and resolve in the fight against terrorism in all its forms and wherever it occurs.”
But the document did not mention the attempt to depose President Recep Tayyip Erdogan or the subsequent widespread crackdown on his opponents.
Concerns about slowing growth in China, the world’s second-largest economy, have receded into the background at the G20. Beijing has embarked on a fundamental transition intended to make domestic consumption the key economic driver instead of massive public spending and cheap exports.
At an earlier meeting in the 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 increase spending on infrastructure, which has been opposed by Berlin.
“The world economy is beleaguered with many serious problems,” Chinese finance minister Lou Jiwei, who hosted the meeting, said on July 23.
“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.”
PERCENT 3.3 The International Monetary Fund’s forecast for global growth this year
Britain’s Finance Minister Philip Hammond (centre) speaks with delegates at the G20 finance ministers meeting in Chengdu, China, on July 24.