The Group of 20 economies reiterated a pledge to use all policy tools to help boost confidence and growth, while stepping up an emphasis on fiscal and structural measures rather than pumping additional monetary stimulus.
“The global economic recovery continues but remains weaker than desirable,” finance ministers and central bank governors from the world’s top developed and emerging nations said in a joint communique at the close of a two-day gathering in Chengdu, China Sunday. “We will carefully calibrate and clearly communicate our macroeconomic and structural policy actions to reduce policy uncertainty, minimize negative spillovers and promote transparency.”
The group expressed optimism about being able to cope with the aftermath of the U.K. vote to leave the European Union, though U.S. Treasury Secretary Jacob J. Lew highlighted that Brexit has escalated the importance of growth that is inclusive. As anticipated, the G-20 repeated its pledge to avoid competitive currency devaluations, consult closely on foreign-exchange policy and resist all protectionism. Japan, as in the past, underscored that the communique also reaffirmed warnings against “excess” currency volatility.
“Underscoring the essential role of structural reforms, we emphasize that our fiscal strategies are equally important to support our common growth objectives,” the group said, in slightly modified language from its last communique, issued in April. Three months ago, the group didn’t use the term “essential” for reform, nor the word “emphasize” for its fiscal policy. The April document also didn’t refer to fiscal strategies being “equally” important.
As in the April and February communiques, the G-20 said “monetary policy alone cannot lead to balanced growth.”
On the U.K. vote to leave the European Union, G-20 members said they’re “well positioned to pro-actively address the potential economic and financial consequences stemming from the UK referendum,” adding that they “hope to see the U.K. as a close partner of the EU.”
“This remains too firmly in the mold of recent G-20 communiques,” said Tristram Sainsbury, a research fellow at the G-20 Studies Center at the Lowy Institute for International Policy in Sydney. “Great talk, technical progress, and promises to use all tools available, but we have been here before. I am concerned that it won’t be enough to convince the world that G-20 governments are taking decisive action to address global risks.”
There was no mention in the communique of Turkey, after disagreement among members over whether to include some reference. German Finance Minister Wolfgang Schaeuble Saturday told reporters that there’s great concern “in Germany and everywhere in Europe that what is happening in Turkey is not in line with what we understand as democracy and the rule of law,” amid a crackdown on political opponents in the wake of this month’s coup attempt.
Turkish Deputy Prime Minister Mehmet Simsek, in a posting on Twitter Saturday, rejected any reference to his country’s political developments in the communique.
A number of countries had already taken steps to bolster growth in the run-up to the Chengdu G-20, which also occurred against a backdrop of diminished currency tensions compared with early this year.
China succeeded in stabilizing growth in the first half of 2016 after unleashing easier credit and loosening its fiscal stance, while Japan is in the midst of compiling its own fiscal package. Britain’s new chancellor of the exchequer, Philip Hammond, had indicated openness to a more generous budget on July 22, when he told the BBC the U.K. could “reset fiscal policy” if necessary.
Chinese Finance Minister Lou Jiwei said the G-20 will review structural reforms every two years, after Saturday calling for the group to intensify policy coordination.
Lou delivered the host press briefing alone, with People’s Bank of China Governor Zhou Xiaochuan staying away from the limelight this time — unlike in February, when he made repeated public appearances at and around the Shanghai G-20 gathering, when investors and foreign officials were clamoring for greater transparency over China’s policy making.
One policy prescription that was off the table for discussion was helicopter money, said Bank of Japan Governor Haruhiko Kuroda, at the conclusion of the meeting on Sunday. He reiterated a day earlier that the central bank is prepared to step up stimulus if needed, while noting that helicopter money is prohibited in Japan.
One proviso for Sunday’s pledges from the G-20: as highlighted by Indonesia’s Finance Minister Bambang Brodjonegoro, they are “not binding.”
“Any commitment, any result would not be binding — but at least everybody knows that G-20 is trying to move in one direction, and trying to synchronize and harmonize the policies,” Brodjonegoro said in an interview Saturday.