Financial leaders from the Group of 20 nations met last week in an effort to review the state of the global economy and make appropriate recommendations for future growth. The meeting ended with only slight optimism.
The final report noted that global growth "remains modest and uneven," but it warned the larger more advanced economies to cease their reliance on irregular monetary policies in their efforts to promote growth. Ironically, it was the supporters of these unbalanced policies that were behind the communique that was released following the meeting which, at the end of the day, pointed to more of the same with few new policy initiatives for keeping growth from continuing to stall.
The results of the G20 were indeed mostly disappointing but some G20 officials took a slightly more positive view on financial markets, citing some recovery from sharp selloffs earlier this year. According to them, markets were in better shape than the last G20 meeting in Shanghai last February.
U.S. Treasury Secretary Jack Lew told a news conference following the G-20 get together, "There's not a one-size-fits-all answer" to boost growth. He added that it was up to each country to decide for itself “how best to apply structural reforms, monetary policy and fiscal spending.”
Brexit, Terrorism and More
Among some of the other issues discussed at the meeting was the possible exit of Britain from the European Union and its impact on market volatility, as well as the difficulties imposed by terrorism, geopolitical conflicts and the more recent problem of mass immigration and refugees. Currency pledges and differences over exchange rates, particularly a weaker dollar, were discussed as were negative interest rates at some central banks.
The results of the G20 meeting came on the heels of the report released by the International Monetary Fund which cut its 2016 growth forecast for the world economy, the fourth such move in less than a year and pointed to yet another downward revision of its outlook for global growth.
The IMF, however, came out with some recommendations: a call for a better mix of monetary, fiscal and structural reform measures while the G-20, despite its understanding of the risks facing the global economy and its strong consensus on the need for a better set of policies to address those challenges, fell short at the meeting of committing to any cooperative actions that could stimulate measures at the national level.
The G20 gathering took place following the release of the so-called "Panama Papers" earlier this month which caused considerable controversy over the widespread use of off-shore tax havens used by companies and wealthy individuals to shield their wealth and one of the few decisions taken by the G20 officials was their pledge to implement measures to combat illegal use of tax laws and to improve tax information sharing.
The disappointing outcome of the G20 meeting came as no surprise to financial analysts. The way they see it, without a concrete action plan, the outlook for global growth and financial stability can only worsen and perhaps only then will the necessary policy response be implemented.