G-20 Says Growth Risks Are Stabilizing as Shock of Brexit Looms

  • Reiterates commitment to avoid competitive forex devaluations
  • Tougher stance on tax transparency after Panama Papers

Finance chiefs of the Group of 20 economies said risks to the global recovery have stabilized while threats to the outlook remain, including terrorism and the U.K.’s potential exit from the European Union.

“Growth remains modest and uneven, and downside risks and uncertainties to the global outlook persist against the backdrop of continued financial volatility, challenges faced by commodity exporters and low inflation,” according to the group’s communique released Friday in Washington.

“Geopolitical conflicts, terrorism, refugee flows, and the shock of a potential U.K. exit from the European Union also complicate the global economic environment,” it said.

The G-20 struck a less alarmed tone than it did at its previous meeting in Shanghai in February, when officials acknowledged the rocky start to the year for financial markets and expressed growing concern about a downgrade in the global economic outlook.

The finance chiefs and central bankers took heart from a rally in global stock markets. The MSCI All-Country World Index has risen about 8 percent since the finance chiefs met in Shanghai, leaving it little changed this year and up about 14 percent from its low on Feb. 11.

Policy Tools

As in Shanghai, finance ministers and central bankers pledged to use all policy tools -- monetary, fiscal and structural reforms -- to stimulate growth. They reiterated that monetary policy alone can’t produce balanced growth.

G-20 members also reiterated that they would consult closely on exchange markets. “We reaffirm our previous exchange-rate commitments, including that we will refrain from competitive devaluations and we will not target our exchange rates for competitive purposes.”

The statement continued, saying the G-20 will resist “all forms of protectionism.”

The G-20 statement contains tougher language on tax transparency following the leak this month of offshore financial records, known as the Panama Papers, which set off a global furor by exposing billions of dollars in assets hidden in tax havens around the world.

The G-20 directed the Organization for Economic Cooperation and Development to “establish objective criteria by our July meeting to identify non-cooperative jurisdictions,” according to the communique, which doesn’t explicitly refer to the Panama Papers. The statement said members will consider “defensive measures” against financial centers and jurisdictions that fail to make progress on complying with international standards on exchange of tax information in the coming years.

Improving transparency of tax systems is vital to the integrity of the international financial system, the statement said.

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