G20 nations must boost coordination to support growth
US Treasury’s Lew says now time to redouble efforts on economy and refrain from competitive FX devaluations
CHINA: The world’s leading economies will step up efforts to lift global economic growth and share the benefits more broadly, top policymakers meeting in China said on Saturday, as they seek to counter growing dissatisfaction with globalisation.
Finance ministers and central bankers from the Group of 20 are huddling in China’s southwestern city of Chengdu to discuss how to confront global challenges exacerbated by Britain’s decision to leave the European Union.
The spectre of protectionism, highlighted by US Republican presidential candidate Donald Trump’s “America First” rhetoric and talk of pulling out of trade agreements, also hangs over the meeting.
“The recovery continues but remains weaker than desirable. Meanwhile, the benefits of growth need to be shared more broadly within countries to promote inclusiveness,” the G20 ministers said in a draft communique seen by Reuters.
US Treasury Secretary Jack Lew said on Saturday it was important for G20 countries to boost shared growth using all policy tools, including monetary and fiscal policies as well as structural reforms, to boost efficiency.
“This is a time when it is important for all of us to redouble our efforts to use all of the policy tools that we have to boost shared growth,” Lew told reporters.
Chinese Finance Minister Lou Jiwei called for more coordination to promote sustainable growth, as fiscal and monetary tools were becoming less effective at spurring economic activity. “G20 countries should increase policy communication and coordination, form policy consensus and guide market expectations, making monetary policy more forward-looking and transparent and increase the effectiveness of fiscal policy,” Lou said.
The G20 meeting was the first of its kind since the Brexit vote and a debut for Britain’s new Finance Minister, Philip Hammond, who is likely to be grilled about the UK’s plans for keeping up economic growth in the wake of Brexit. The International Monetary Fund this week cut its global growth forecasts because of the Brexit vote, saying that uncertainty over Britain’s future trade relationship with Europe will stall investment and sap consumer confidence.
Data out of Britain on Friday seemed to bear out fears, with a business activity index posted its biggest drop in its 20-year history. And Hammond said on Friday the UK could reset fiscal policy if necessary.
Lew, in a bilateral meeting with Japanese Finance Minister Taro Aso, reiterated the need for G20 members to refrain from competitive devaluations.
Regarded as a safe haven at times of market turmoil, the yen strengthened to around 100 to the dollar after the Brexit vote, much to the chagrin of Japanese officials, although it has since eased back to around 106 per dollar.