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July 25, 2016

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G20 vows to lift growth despite fears over Brexit

THE world’s biggest economies will work to support global growth and better share the benefits of trade, policymakers said yesterday after a meeting in China’s southwestern city of Chengdu that was dominated by the impact of Britain’s exit from Europe and fears of rising protectionism.

Britain’s vote to leave the European Union heightens risks for the world economy, finance chiefs from the Group of 20 leading countries said.

The outcome of June’s referendum “adds to the uncertainty in the global economy,” they said in a communique at the end of two-day meeting of central bankers and government officials in Chengdu.

But they insisted in the communique that G20 countries were “well positioned to proactively address the potential economic and financial consequences” of the vote, adding: “In the future, we hope to see the UK as a close partner of the EU.”

Britain’s new Finance Minister Philip Hammond said the uncertainty about Brexit would begin to abate once Britain laid out a vision for a future relationship with Europe, which could become clearer later this year.

But there could be volatility in financial markets throughout the negotiations in the years ahead, Hammond said.

The communique said Brexit had added to uncertainty in the global economy where growth was “weaker than desirable.” Members, however, were “well positioned to proactively address the potential economic and financial consequences,” it said.

“In light of recent developments, we reiterate our determination to use all policy tools — monetary, fiscal and structural — individually and collectively to achieve our goal of strong, sustainable, balanced and inclusive growth.”

The G20 would strengthen the coordination on a stable foreign exchange market, including refraining from competitive devaluations, it said.

US Treasury Secretary Jacob Lew stressed to his European and British counterparts “the need for negotiations to take place in a smooth, pragmatic and transparent manner.”

“A highly integrated relationship between the UK and the EU is in the best interests of Europe, the United States and the global economy,” he told reporters after the meeting.

On Friday, International Monetary Fund chief Christine Lagarde called for quick action to end such uncertainty brought by the British-EU split. She said that turmoil prompted the IMF to cut its forecast of this year’s global growth by 0.1 percentage points.

China’s Minister of Finance Lou Jiwei said every member was putting “pressure on themselves to structure reform due to their responsibilities towards a sustainable economic growth.”

The G20 statement yesterday also cited the importance of reducing excess production capacity in steel and other industries that has led to an overcapacity. That has been a source of tension between China and trading partners who have accused China of exporting steel at low prices.

The communique cited “geopolitical conflicts, terrorism, and refugees” as further sources of economic uncertainty.


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