Just three months ago, G20 government representatives and central bank chiefs cited Britain’s potential exit as one among many “downside risks” for the global economy.
But with the shock vote in June for Britain to leave, the issue has come to the forefront.
Bank of Japan governor Haruhiko Kuroda said Saturday that it was a “major” item on the agenda for the G20 finance chiefs meeting in the Chinese city of Chengdu, according to Japanese media.
Ahead of the meeting the International Monetary Fund (IMF) downgraded its forecast for global growth this year, and officials in Chengdu said protracted talks between the EU and Britain over the departure could heighten risks.
“It won’t mean that they’ll get there in a week or a month. It’s a process that could take longer,” a senior US Treasury official told journalists on Saturday.
“The thing that would be very disruptive to confidence is if this becomes a highly confrontational process,” he said.
Britain’s new finance minister Philip Hammond on Saturday met his German counterpart Wolfgang Schaeuble and tweeted: “We agree we need a deal that works for the people of Britain & Germany.”
At a family photo on Sunday, Hammond was seated in the front row, but spent most of the event conversing only with one of his neighbours, World Bank president Jim Yong Kim.
Bloomberg News reported that a draft communique for the meeting showed G20 countries would declare themselves able to handle the fallout of the Brexit vote.
“Members of the G20 are well positioned to proactively address the potential economic and financial consequences stemming from the UK referendum,” it quoted the draft document as saying.
‘More negative outcomes’
The IMF appears to be more alarmed.
“‘Brexit’ marks the materialisation of an important downside risk to global growth,” IMF staff said in a report ahead of the meeting.
The IMF recently lowered its forecasts for global growth this year and next by 0.1 percentage point, to 3.1 percent and 3.4 percent respectively.
“But with ‘Brexit’ still very much unfolding, more negative outcomes are a distinct possibility,” the report said.
Other challenges threaten: a slowdown in the Chinese economy, as well as terrorist attacks and the failed coup in Turkey — which have rattled financial markets.
China’s economy, the world’s second largest, is caught in a fundamental transition to making domestic consumption the key driver instead of massive public spending and cheap exports.
Turkey’s Deputy Prime Minister Mehmet Simsek, who is attending the meeting, said on Twitter that the attempted putsch against President Recep Tayyip Erdogan would not merit mention in the final communique.
At a meeting in Chinese commercial hub Shanghai in February, G20 finance chiefs agreed to use “all policy tools” including monetary easing, fiscal spending and structural change to boost growth.
The IMF has called on some countries, notably Germany and the United States, to boost spending on infrastructure, which has been opposed by Berlin.
“The world economy is beleaguered with many serious problems,” meeting host Lou Jiwei, China’s finance minister, said on Saturday.
“We should make monetary policy more forward-looking and transparent, enhance the effectiveness of fiscal policy… so as to support stronger recovery of the world economy.”