Finance chiefs of the world’s 20 leading economies are expected to vow further cooperation this weekend to ensure economic and market stability after Britain voted to leave the European Union last month.
At a two-day meeting starting Saturday in the Chinese city of Chengdu, the Group of 20 finance chiefs are expected to put “all policy tools” on the table to prevent adverse effects from Brexit from spreading as the global economic recovery remains subdued.
Discussions are likely to focus on Brexit’s effects on the global economy and market, with the International Monetary Fund already projecting slower growth for 2016 and 2017.
The IMF said Tuesday the world economy is expected to grow 3.1 percent and 3.4 percent in 2016 and 2017, respectively, both down from April estimates of 3.2 percent and 3.5 percent. Brexit, it said, may become “an important downside risk.”
“We have to minimize the impact (of the Brexit) to Asia and other countries,” Finance Minister Taro Aso told a news conference last week. “But first we need to listen to what the European Union and Britain have to say.”
The June 23 Brexit vote stoked volatility in financial markets, leading to a plunge in the pound and selloffs in stocks worldwide. The U.S. dollar also temporarily fell below ¥100 for the first time since November 2013.
The market appears to have stabilized since then, with the dollar recently recovering above the ¥105 line.
However, political and economic uncertainties lie ahead, while global growth is undermined by a slowdown in China and other emerging economies.
Adding to uncertain economic prospects, increasing geopolitical risks have cast a shadow over the global economy following another terrorist attack in France and the failed coup attempt in Turkey over the weekend.
“The focus will be whether the Brexit vote would undermine the European Union’s unifying force or not” as many elections are slated to take place in Europe this year, said Kazuo Momma, executive economist at Mizuho Research Institute Ltd.
Momma, a former Bank of Japan executive director, said he is closely watching how the G-20 responds to the possibility of anti-globalism gaining momentum and spurring the spread of protectionism that could hurt the global economy.
“Whether they can step up talks on income distribution and reducing disparity or place more emphasis on pursuing inclusive growth will be a major point of their discussions for seeking expansion of the world economy based on globalism,” Momma said.
At the gathering, the G-20 finance ministers and central bank chiefs from developed and emerging countries are expected to affirm mobilizing monetary, fiscal and structural policies individually and collectively to bolster growth.
They are also likely to reiterate that excess volatility and disorderly moves in exchange rates can have adverse effects, while also reaffirming previous commitments to refrain from competitive devaluations.
As a potential means of addressing the gap between rich and poor, the G-20 is expected to take up the issue of tax avoidance and approve new criteria to specify governments that are failing to cooperate with global efforts to seek transparency on taxation.
The criteria were adopted late last month by the Organisation for Economic Co-operation and Development prior to the launch of a tax information exchange initiative next year involving around 100 countries and territories.
In order to make the initiative more effective, the committee will consider blacklisting some countries as early as next year to identify those which do not comply with the criteria, with an eye to imposing punitive measures.
Amid growing economic uncertainty, monetary policy decisions in the United States and Japan are also drawing attention ahead of their policy meetings later this month, with a focus on the speed of U.S. interest rate hikes.
From Japan, Aso and BOJ Gov. Haruhiko Kuroda are expected to attend the meeting.
The G-20 groups Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United States and the European Union.