Financial leaders from the Group of 20 nations said on Friday they were heartened by a recent recovery in financial markets, but warned that global growth was “modest and uneven” and threatened by weakness in commodities-based economies.
In a communique issued after their meeting in Washington, G20 finance ministers and central bank governors repeated their pledge to refrain from competitive currency devaluations, but offered no new initiatives to keep growth from stalling.
The G20 officials took a slightly more positive view on financial markets, which they said had mostly recovered from sharp selloffs earlier this year and were in better shape since they last met in Shanghai in February.
“However, 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,” they said.
The communique also pointed to Britain’s possible exit from the European Union, geopolitical conflicts, terrorism and refugee flows as complications for the global economic landscape.
The statement repeated G20 pledges to “use fiscal policy flexibly” to strengthen growth, job creation and confidence. It kept language that member countries “will continue to explore policy options,” adding that they would be “tailored to country circumstances.”
“There’s not a one-size-fits-all answer” to boost growth, U.S. Treasury Secretary Jack Lew told a news conference, adding that each country needed to decide for itself how best to apply structural reforms, monetary policy and fiscal spending.
But he emphasized that it was important for Japan and China to pursue structural reforms – China to reduce excess industrial capacity and Japan to reform agriculture and other key sectors. Both of these would require some social spending to support displaced workers, Lew added.
The G20 gathering, the highlight of the International Monetary Fund and World Bank spring meetings in Washington, came amid growing pressure on richer nations to boost infrastructure spending, deregulate industries and spur employment.
Earlier this week the IMF cut its 2016 growth forecast for the world economy, the fourth such move in less than a year.
The meetings this week also coincided with weakness in a number of key commodity-based economies, particularly Brazil, which is enduring its worst recession in decades.
After release of the so-called “Panama Papers” earlier this month stirred up controversy over global elites’ widespread use of off-shore tax havens to shield their wealth, the G20 officials strengthened their pledge to implement measures to combat exploitation of tax law mismatches and improve tax information sharing.
They said “defensive measures will be considered by G20 members against non-cooperative jurisdictions” if progress towards these goals is not made.
Despite the repeat of currency pledges, differences over exchange rates, particularly a weaker dollar, and negative interest rates at some central banks were readily apparent at the Washington meetings.
Japanese Finance Minister Taro Aso said the G20 agreements on currencies did not preclude appropriate action in the currency market to prevent excessive and disorderly exchange rate movements. The yen earlier this week hit a 17-month high against the dollar.
German Finance Minister Wolfgang Schaeuble this week has warned of the fallout from the European Central Bank’s negative rate policies, saying it would hurt bank profitability and German savers.
And ECB sources told Reuters that European Central Bank is unhappy with the U.S. dollar’s recent fall but accepts it as a natural consequence of the Federal Reserve’s cautious economic outlook and sees no reason to act to weaken the euro.
“With the Fed’s lowered rate path comes a weaker dollar and we need to avoid even the impression that we’re targeting the exchange rate,” one of the three sources said.
(Reporting by David Lawder; Additional reporting by Jason Lange, Balazs Koranyi, Jan Strupczewski, Lindsay Dunsmuir, Leika Kihara, Gernot Heller and Koh Gui Qing; Editing by Paul Simao and Andrea Ricci)