face of threats that could derail the global economy (the Brexit terrorism), several G20 countries, encouraged by the IMF, have called on states to boost public spending to revive growth.
on the first day of a meeting of ministers of G20 finance in Chengdu (in south-west China), the central bankers vied of gloomy adjectives to paint an alarming picture of the situation. “This is a period of continued uncertainty in the economic outlook,” said some journalists before the US Treasury Secretary, Jack Lew. “The risks have become more prominent,” abounded the International Monetary Fund (IMF) in a memo released Saturday, after lowering its forecast for global growth for 2016 and 2017, to 3.1% and 3.4% respectively.
the growth of the world GDP could even “slowing drastically more (than expected) if the rise of political and economic uncertainty continued due Brexit,” the IMF said in the report. In fact, the decision of the UK to leave the European Union was on everyone’s mind, even if the issue was not formally on its agenda. Recently appointed as the Chancellor of the Exchequer, Philip Hammond, was present in the Sichuan capital to try to defuse the general excitement.
Send “reassuring” signal
Ultimately , the leaders of the top 20 world powers should nevertheless anxious to show Sunday to send a reassuring signal to the markets and investors. “G20 members are well positioned to respond proactively to potential financial and economic impact” of the break between London and the EU, says the draft final statement, disclosed Saturday by Bloomberg News . Yet beyond the British case, the continuing slowdown in global growth still great concern, at a time when the ultra-accommodative monetary policies seem to reach their limits.
In this context, besides the “structural reforms” -visant for example the labor market or the regulated professions – “the margins of budgetary maneuver, when available, should be used” fully argued the IMF. “There is an urgent need for G20 countries to intervene to put growth back on track.” According to the Fund, Australia, Canada, the US and Germany, in particular, should “focus their public spending towards investment in infrastructure” to “boost their short-term demand.”
Jacob Lew said the same opinion: “we reach a point where it is essential for all of us to redouble our efforts and use all available tools (…) they are familiar recipes, they are structural or budget. “
Stabilization of Chinese growth
the major central banks are certainly still struggling to support activity, suddenly mountains of cash and cuts in interest rates, but “monetary policy can not do everything,” confirmed Michel Sapin, French Minister of Economy, at the AFP . It must be that “countries that have fiscal space use to support investment (…) it is our position, even if it is a problem for any country,” he insisted, aiming German orthodoxy.
Berlin, indeed, sticking to his credo unique “structural reforms”, having previously denounced fiscal stimulus “ineffective” and monetary policy “counterproductive.” But his reticence could be undermined by the proliferation of threats. Besides Brexit, a senior official on condition of anonymity evoked the danger of the “Three T” for global economic stability. A formula combining terrorism, after repeated attacks in Europe, Turkey, shaken by a failed coup and hardening of the authorities and Donald Trump, Republican candidate for the White House very protectionist rhetoric. “Obviously, a candidate for the US presidency who expressed skepticism about the benefits of free trade, it worries us,” said bluntly Saturday, Secretary General of the OECD Angel Gurria.
however, fears over the slowing Chinese economy seemed eased somewhat after the Beijing support and stabilize the country’s growth in the second quarter. China has nevertheless warned that it could not alone stop the turmoil related Brexit and global economic slowdown, “it is impossible to carry the burden of the world on our shoulders,” hammered on Friday Prime Minister Li Keqiang.