U.S. Treasury Secretary Jacob J. Lew said risks including volatility in emerging markets and China’s economic agenda are clouding the global outlook, requiring nations to focus on boosting growth and job creation.
“There has been considerable volatility in global markets, especially in several emerging markets,” Lew said in a letter yesterday to his Group of 20 colleagues. “We are monitoring these developments closely.”
Lew, who will join the Feb. 22-23 meeting in Sydney of G-20 finance ministers and central bankers, urged China to move toward a stable economy that “delivers higher living standards to its population.” The euro area, which is “vulnerable to the persistence of very low inflation,” needs to boost domestic demand and strengthen its banking system, he said.
Japan needs to stay committed to the implementation of structural changes that would help bolster the domestic market and stimulus measures to cushion the impact of the increased consumption tax, he said in the letter.
“While we are experiencing a global economic recovery, activity remains weak and global demand is deficient,” Lew wrote. “Actions to support near-term recovery in demand and global rebalancing are critical for the health of our economies.”
He called for a “durable rebalancing of global demand” and urged countries with current-account surpluses to boost domestic demand growth and adhere to market-based exchange rates that “facilitate, rather than frustrate, the international adjustment process.”
Lew reiterated confidence that the U.S. economy will gather momentum this year “as fiscal headwinds recede,” consumption and investment stay firm, and the housing industry strengthens. He said that while he was “deeply disappointed” U.S. lawmakers didn’t approve changes in quotas and governance at the International Monetary Fund, the Obama administration remains “fully committed” to getting support from Congress.
He also said the U.S. is leading the world’s effort in implementing the rules stabilizing the banking system and said G-20 needs to do more to reduce risks and build a level playing field across the global financial system. He mentioned need for higher-quality capital, strong liquidity buffers and implementation of a derivatives-trading framework.
The G-20 economies need to move forward on projects that would limit tax evasion and profit-shifting by multinational companies, Lew said.