Investors worried about the risk of a new global recession are hoping that data over the coming week will show that some momentum remains in the world economy, eight years into its slow recovery from the financial crisis.
The Group of 20 economies were unable to agree on a joint push for new stimulus measures at a meeting which ended on Saturday, turning attention instead to upcoming business surveys from China, Japan, Europe the United States, news outlets reported.
Central banks in Europe and Japan may inject a little more stimulus into their economies later in March. But the Federal Reserve and the Bank of England look likely to sit tight for now, meaning hopes for a period of calm in the world’s volatile financial markets lie largely with the indicators.
A first reading of inflation in February for the eurozone on Monday will help shape expectations of how much further below zero the European Central Bank is likely to push its deposit rate the following week.
Eurozone inflation picked up in January but is expected to have fallen back to zero in February.
Economists at Citi have cut their forecast for global economic growth this year to 2.5% from 2.7% due to slowing activity in developed economies. They said growth could come in below 2%—equivalent to a global recession—because of the chance of weaker growth among emerging economies.
Lift Sluggish Growth
According to a draft communiqué, the meeting in Shanghai agreed to use all policy tools to lift sluggish global growth, despite German disquiet over fiscal and monetary stimulus.
The G20 ministers were seeking policy solutions amid growing concern about the headwinds facing the global economy, principally concerns about growth in China and the US.
After years of money printing and historic low interest rates across much of the developed world, the outlook for growth is still uncertain and the communique seen noted that monetary policy alone could not bring balanced growth, the reports said.
“The global recovery continues, but it remains uneven and falls short of our ambition for strong, sustainable and balanced growth,” it said.
“Monetary policies will continue to support economic activity and ensure price stability ... but monetary policy alone cannot lead to balanced growth.”
The draft suggested that markets’ recent ructions have been overreactions to economic anxieties that do not reflect economic fundamentals, the reports said, not helped by threats such as Britain’s possible exit from the EU and the European refugee crisis.
Warning on Brexit
The draft communique also noted “the shock of a potential UK exit from the European Union” in the seventh line of its text.
It added: “While recognizing these challenges, we nevertheless judge that the magnitude of recent market volatility has not reflected the underlying fundamentals of the global economy.”
A so-called Brexit would be a “shock” that ranks among rising downside risks and vulnerabilities for the world economy.
The chances of a vote to leave are seen as having risen after the Mayor of London Boris Johnson backed the cause, pitting himself against Prime Minster David Cameron, long a rival within the ruling Conservative Party.
Britain’s chancellor, George Osborne said fellow finance ministers and central bank chiefs had unanimously concluded that a vote to leave the EU by Britain would be one of the biggest economic dangers this year.
