G20 finance officials meeting in China should support economic growth amid Brexit uncertainty, says IMF
The Group of 20 finance officials meeting in China this weekend should agree on a broad-based approach to support consumer demand, limit private-sector debt and implement structural reforms to combat deepening risks to growth, the International Monetary Fund (IMF) says.
The IMF, in a briefing note to G20 finance ministers and central bank governors gathering in the city of Chengdu, in Sichuan province, said that reducing the uncertainty surrounding Britain’s exit from the European Union would help limit an adverse impact.
Policymakers should stand ready to act decisively should financial market turbulence threaten the global outlook
“A smooth and predictable transition to a new relationship between the UK and the EU that as much as possible preserves the gains from trade is essential,” the IMF said in the report on Thursday.
“While uncertainty about the outcome of negotiations remains, policymakers should stand ready to act decisively should financial market turbulence threaten the global outlook.”
The G20 note follows the IMF’s move on Tuesday to cut its global growth forecasts again due to uncertainty caused by the June 23 Brexit vote – to 3.1 per cent for 2016 and 3.4 per cent for 2017 – a 0.1 percentage-point reduction for each year
While the IMF said short-term demand needed continued support, it also urged officials to focus on policies that support medium-term and long-term growth, such as those that facilitate balance-sheet repair for banks and companies, and reform labour and business sectors.
The IMF said China should adjust its macroeconomic policies to adjust for a moderate slowing of its economic growth, including limiting the expansion of credit and switching from off-budget investment activities to on-budget measures that help boost consumption.
China should pursue its plans to liberalise the economy further, while disentangling the still-pervasive web of market distortions ... in particular, bolder reforms of state-owned enterprises ... are needed
“China should pursue its plans to liberalise the economy further, while disentangling the still-pervasive web of market distortions,” it said.
“In particular, bolder reforms of state-owned enterprises, such as imposing hard budget constraints and opening up the SOE-dominated service sector, are needed.”
In an era of rising anti-trade sentiment, the IMF also said that G20 policymakers needed to “revive the spirit of multilateralism and globalisation” by working to ensure that trade benefits were widely shared.
“This means paying urgent attention to enhancing the gains of globalisation, limiting its costs, taking mitigating measures for affected workers and making a positive case for integration to sceptical parts of the public,” it said, adding that this effort would require using more public funds to retrain workers.
