Global economy needs G20 push

Calls for boosting the slowing global economy, dominated G20 forum on Saturday as the declining growth in China and Britain’s vote to leave the European Union (EU) threaten to cut global growth. With their eyes set on turning the slowing economic growth around, central bank chiefs and finance ministers from the world’s top 20 economies met in the southwestern Chinese city of Chengdu.
Surprisingly, attendees appeared less concerned about a slowdown in China’s economy — a key driver of global growth — and persistent weakness in its yuan currency. Their focus was more on the Brexit.
This comes as Beijing warned that the world cannot depend on China alone to save it from a Brexit-induced downturn, ahead of hosting the meeting of G20 finance ministers.
China is overhauling its economy to make the spending power of its nearly 1.4 billion people a key driver for growth, instead of massive government
investment and cheap exports.
As China’s warning came, Brexit’s fallout became apparent. It inflicted an immediate blow on the British economy as business activity shrank at its fastest pace since the last recession seven years ago.
In the weeks following Brexit, there was a “dramatic deterioration”, Markit Economics said in a one-time report published on Friday. Services and manufacturing dipped and a gauge of the private-sector economy plunged to 47.7, well below the 50 level that divides expansion from contraction, it said.
Of course, this sluggishness is the strongest evidence yet that politics is propelling the world’s fifth largest economy into slowdown. As a result, it intensifies pressure on the Bank of England to deliver fresh monetary stimulus and on the government to reverse fiscal austerity.
Markit projected that the economy on will contract by 0.4 percent this quarter.
Ahead of the G20 meeting, the IMF reiterated its call on key G20 nations to boost government spending. It urged advanced economies such as Germany and the United States to channel more public spending into infrastructure investment to help bolster growth, an issue that has sparked divisions among G20 members.
Berlin doesn’t share the view of IMF. Ahead of the G20 gathering, a German ministerial source told reporters that the use of government stimulus would not be one of the meeting’s main themes.
Germany has a long history of fiscal rigour and argues that government spending is ineffective at boosting growth, while monetary moves such as ultra-low interest rates and a flood of liquidity and credit are counterproductive.
But French finance minister Michel Sapin contends that the fiscal policy should be used “as much as possible”.
In its most recent forecast, the IMF lowered its forecasts for global growth this year and next by 0.1 percent, to 3.1 percent and 3.4 percent respectively.
At the G20 summit, the world’s major economies discussed cooperation on tax collection and information sharing as companies seek to minimise the amount they pay to governments.
The world’s leading economies should do more to lift the global economic growth and deal with impact from Britain’s Brexit vote as well as address
dissatisfaction with globalisation. They should keep an eye on China’s
slowdown too.