G20 pledges to limit fallout of Brexit

25 Jul 16

The world’s biggest economies have vowed to use all available tools to subdue the impact of Britain’s exit from the European Union and growing economic nationalism.

Following the two-day G20 meeting in Chengdu, China this weekend, which focused on the fallout of the UK’s Brexit vote and fears around growing protectionism, finance ministers and central bank governors issued a communiqué pledging measures to address uncertainty and increase inclusiveness.

It said members of the G20 are “well positioned to proactively address the potential economic and financial consequences stemming from the UK referendum”, and added it would be desirable to see the country remain as a “close partner” of the EU.

The International Monetary Fund recently cut its global growth forecasts in anticipation of the impact of the UK referendum result. G20 ministers agreed the outcome had added more uncertainty to a global economy where growth was already “weaker than desirable”.

“We are taking actions to foster confidence and support growth,” they continued. “In light of recent developments, we reiterate our determination to use all policy tools individually and collectively to achieve our goal of strong, sustainable, balanced and inclusive growth.”

Flexible fiscal policies, tax policies and public expenditure will be more growth-friendly, with a priority placed on high-quality investment, and efforts will be made to prevent volatile exchange rate fluctuations.

The statement continued: “We resist all forms of protectionism. We will carefully calibrate and clearly communicate our policy actions to reduce policy uncertainty, minimise negative spillovers and promote transparency.”

Ministers and governors stressed the role open trade policies play in driving growth around the world, but noted that the “benefits of growth need to be shared more broadly within and between countries”.

This acknowledges a rising tide of economic nationalism, for example, peddled by Republican presidential candidate Donald Trump. The party’s nominee has suggested tariffs on imports from China, and said he will sign no trade agreement that hurts America’s “neglected” workers.

Jack Lew, US Treasury secretary, said on Saturday that the Brexit vote is another clue that the benefits of growth need to reach working and middle class families as well as businesses and investors.

The G20’s communiqué said the world’s economic leaders will “strive to reduce excessive imbalances” as they pursue stronger growth for the world economy.

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