World Economy

Global Growth Grim

Global Growth GrimGlobal Growth Grim

China’s commerce minister said Saturday the outlook for the global economy remains grim despite its gradual recovery from the impact of the financial crisis.

Gao Hucheng’s comments underscored growing concerns about the global economy, which have deepened since the UK voted to leave the European Union, raising fears of a global recession, news outlets reported.

The talks, which come ahead of the China-hosted G20 summit scheduled for September in the city of Hangzhou, also included representatives from global organizations including the International Monetary Fund, the Organization for Economic Cooperation and Development and the World Trade Organization.

“In the past few years through our shared hard work, the global economy emerged from its previous low and is developing in a good direction,” Gao said. But at the same time, “the deep effects of the global financial crisis can still be felt.”

Gao did not mention Brexit in his opening remarks at a meeting of trade ministers in Shanghai on Saturday held in the run-up to China’s hosting of the G20 summit later this year on the theme of Strengthening the G20 Trade and Investment Mechanism. He said governments should work together to find ways to revitalize growth.

“G20 foreign trade and economic aggregate account for 80% and 85% of the world’s total respectively. The group therefore plays a significant role in the world economy and shoulders the responsibilities of engine-driving world economy for growth,” he said.

  Lacking in Strength

“The revival and growth of the global economy is still lacking in strength,” Gao said. “Low levels of global trade and investment have not recovered to their pre-financial crisis levels.”

“Global trade is dithering, international investment has yet to recover to levels before the financial crisis, and the global economy has yet to find the propulsion for strong and sustainable growth,” he said.

“In the current circumstances, the international community expects the G20 to show leadership in resolving the prominent problems we are facing and inject impetus for recovery and growth.”

China, the world’s largest trader in goods, saw its total trade fall 8% in 2015.

  Forecast Cut

In April, the IMF cut its 2016 global growth forecast for the fourth time in a year, to 3.2% from 3.4%, amid weakening global demand and geopolitical risks. A fifth straight global growth mark down by the IMF looks almost certain.

The World Trade Organization expects 2016 to be the fifth consecutive year of less than 3% growth in global trade, and Director-General Roberto Azevedo said on Friday trade would remain sluggish going into the third quarter of the year.

He also appealed for cooperation in the battle to spur trade.

“This is a time for governments to work together to see how trade can be used to boost growth, development and job creation,” he said.

Last month, the World Bank cut its forecast for the global economy this year, predicting it will expand 2.4%, down from the 2.9% it expected in January.

The World Bank identified China’s economic decline as a key factor in the sharp slowdown in global trade.

Low commodity prices continue to vex many developing countries whose economies depend on exports of those commodities. And advanced economies are still struggling to gain momentum as they contend with aging workforces and lackluster productivity growth.

  Specter of Protectionism

The specter of protectionism also hangs over the meetings in Shanghai.

China’s huge but struggling steel sector has relied on exports to offset the impact of slowing domestic demand, but it has been accused of using unfair pricing to push foreign competitors out of business.

The trade ministers are working out a more effective coordinating and cooperating mechanism which trade and investment working group has formulated through last year’s Antalya meeting.

These ministers will draft out a G20 global trade growth strategy on how to improve trade governance and reduce global transaction costs through improved policy coordination, promoted trade services, improved trade finance and enhanced e-commerce.