World Economy

G20 Focuses on Ways to Boost Global Economy

G20 Focuses on Ways to Boost Global Economy G20 Focuses on Ways to Boost Global Economy

The world's leading economies will do more to lift global growth and share the benefits more broadly, top policymakers said on Saturday as they sought to deal with fallout from Britain's Brexit vote and counter dissatisfaction with globalization.

Finance ministers and central bankers from the Group of 20 nations are huddling in China's southwestern city of Chengdu this weekend to discuss how to confront global challenges exacerbated by Britain's decision to leave the European Union.

"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 on Saturday.

The draft, which is subject to change before it is expected to be issued at the end of the meeting on Sunday afternoon, said Brexit added to uncertainty in the global economy but G20 members were "well positioned to proactively address the potential economic and financial consequences".

The members will also work to tackle excess production capacity in steel and some other industries, including government subsidies that have distorted markets, officials said.

Excess capacity in steel industry has been a hot-button issue for many G20 countries this year amid a slowdown in global demand that has led to a steel glut, layoffs and idled mills.

Widespread Concerns

Jack Lew, US Treasury secretary, said that the vote had reflected widespread concerns that working and middle class families were not benefiting from globalization, underlying the need for a coordinated international response, AFP said.

“The (UK) referendum reinforces the importance of concentrating on shared growth,” Lew said. “The benefits of growth (should) not just go to the bottom lines of businesses or investors, but also (to) working families and the middle class.” He added that the G20 needed to “redouble efforts” to boost “shared growth”.

Lou Jiwei, Chinese finance minister, called on G20 members to embrace a “coordinated” response, adding that they should “make monetary policy more forward-looking and transparent while increasing the effectiveness of fiscal policy”.

Speaking in Beijing on the eve of the G20 meeting, Chinese Prime Minister Li Keqiang said that his country “could not shoulder the major responsibilities of the world economy” on its own.

Process of Divorce

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 faced questions about how quickly the UK planned to move ahead with formal negotiations to leave the EU. Many countries are worried that a long delay could add to uncertainties that are dragging on the world economy.

The International Monetary Fund this week cut its global growth forecasts because of the Brexit vote.

Data on Friday seemed to bear out fears, with a British business activity index posting its biggest drop in its 20-year history.

"I hope that there is going to be clarification about the timing and process of the divorce. The sooner the better so this generates a new equilibrium," Italian Economy Minister Pier Carlo Padoan told Reuters.

French Finance Minister Michel Sapin said even though Britain was not prepared for Brexit, its response time should not be indefinite.

And German Finance Minister Wolfgang Schaeuble said it should not fall to other countries to spend more to try to cushion the blow of Britain's exit.

"I believe that is a matter that the Britons need to deal with themselves," he said following talks with Hammond.

Rising Risks

The International Monetary Fund has warned of rising risks to the global economy, as it called on some G20 nations to boost government spending.

“Global growth remains weak, and downside risks have become more salient,” the IMF said in a report released ahead of the G20 meeting.

“Growth could be even lower if the current increases in economic and political uncertainty in the wake of the ‘Brexit’ vote continue.”

In an update to its April forecast, the IMF lowered its forecasts for global growth this year and next by 0.1%, to 3.1% and 3.4% respectively.

The IMF wants advanced economies like Germany and the United States to channel more public spending into infrastructure investment to help boost global growth, an issue that has sparked divisions among G20 members.

“Reforms that facilitate the scaling up of infrastructure investment would help raise productive capacity, boost short-term demand directly, and catalyze private investment,” it said.