Britain’s vote to exit the European Union heightens risks for the world economy, finance chiefs from the G20 group of leading countries said on Sunday, vowing to use “all policy tools” to boost growth.
The outcome of June’s referendum “adds to the uncertainty in the global economy”, they said in a communique after a meeting of central bankers and ministers in the Chinese city of Chengdu.
But they insisted 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.”
“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,” said the communique, repeating a pledge from an earlier meeting in Shanghai in February.
But it called for “inclusive growth” to bring in those left out of economic prosperity.
Fiscally rigorous Germany in particular is reluctant to endorse the use of government spending to boost growth, seeing it as ineffective.
“It would be a mistake to think about the choice of tools as being either/or when it comes to structural reforms or using fiscal space,” said US Treasury Secretary Jacob Lew. “The two go hand-in-glove.”
Embattled IMF managing director Christine Lagarde – who faces prosecution in France on accusations of neglecting her duties as a government minister – abruptly cancelled a news conference after the meeting, citing scheduling conflicts.
“Lacklustre growth of the post-crisis era continues,” she said in a statement. “Structural reforms are particularly critical.”
Concerns about slowing growth in China, the world’s second largest economy, have receded into the background at the G20 in the face of other threats.
Apart from the British referendum vote the G20 cited several other factors complicating the global economic environment, among them “geopolitical conflicts, terrorism and refugee flows”.
But participants said Brexit was at the forefront of concerns at the meeting in Chengdu, the last before the G20 summit in September.
Philip Hammond, Britain’s finance minister, told reporters the subject had come up “a great deal”.
“The reality is there will be a measure of uncertainty continuing right up to the conclusion of our negotiations with the EU,” he said.
Before the meeting the International Monetary Fund downgraded its forecasts for global growth this year and next by 0.1 percentage points, to 3.1 per cent and 3.4 per cent respectively.
“‘Brexit’ marks the materialisation of an important downside risk to global growth,” IMF staff said in a report, adding that as it was “still very much unfolding, more negative outcomes are a distinct possibility”.
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