Daily Management Review

G20 financiers are ready to combat Brexit consequences


07/25/2016


Key economic regulators assessed the UK’s exit from the EU as the most significant threat to the global economy’s growth since the crisis of 2008-2009. This follows from the statement of the Group of Twenty after their two-day meeting. Finance Ministers and Heads of central banks of the G20 agreed that monetary measures alone will not be sufficient to combat the slowdown. At that, the experts noted that the state support growth in 2017 could be a record since 2009.



"The growth restoration continues, yet still remains below expectations, while consequences of the UK’s referendum added uncertainty to the global economic; risks of growth downward prevail over supporting factors", stated Finance Ministers and Heads of central banks of the G20, expressing readiness to deal with the growth reduction by all possible means. A communiqué of the two-day meeting in the Chinese city Chengdu notes that the G20 would like to see the UK as a close partner of the EU (the formal exit from the EU has been postponed at least until the end of the year).

According to the IMF, which prepared a report on key risks, Brexit has affected revision of global growth forecasts (in July, forecast for 2016-2017 has been cut by 0.1 percentage points, to 3.1% and 3.4%, respectively). European Commissioner for Economy Pierre Moscovici earlier predicted that the EU’s growth could be slowed down by 0.2-0.5% of GDP thanks to Brexit. According to the Washington-based Institute of International Finance, the British economy is entering into a recession, which could last for about a year (minus 0.2% in 2017; the IMF forecast is significantly more optimistic - 1.3%). 

Above that, there are other factors to impede faster growth. Among them are reduced productivity, coupled with aging population, growing debt burden of the private sector in emerging economies, low levels of investment and so on. In these conditions, the economy will not stay supported by monetary measures only, so the participants approved a new plan of structural reforms. In total, the plan mentions nine common areas, including investment support and lowering of trade barriers, as well as new criteria to assess progress of reforms. Country-specific plans will be presented at the G20 Summit in Hangzhou in September.

Preliminary recommendations prescribed by the fund do not contain any special innovations: state investment should be more efficient and re-directed to support growth (without increasing the support volume); the economies should be diversified and the investment climate - improved (need to improve dispute resolution procedures of the private and public sector companies was noted separately). However, as noted in the HSBC, fiscal measures are still very popular. This year, growth of state support throughout the world, according to the bank’s forecast, may turn out to be comparable with 2009.

source: theguardian.com






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