‘Good progress,’ but few details on how to strengthen global economy as G20 summit concludes

OTTAWA – Canada’s finance minister says he’s encouraged by “very positive feedback” from his Group of 20 peers to the Liberal government’s economic blueprint outlined during a two-day summit in Shanghai.

But while Bill Morneau said the gathering of industrialized nations – coming at a time of growing concerns within the stability from the global economy – “made good progress” to help to strengthen sustained growth, the actual text of the group’s communiqu offered few details of the agreement.

The G20 finance and central bank chiefs, however, maintained they were “committed to further enhancing the structural reform agenda” first agreed to in 2014 – an objective that has been complicated by the global collapse in oil prices since mid-2015 and new concerns that the possible exit by Britain in the European Union provides another shock towards the global economy.

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Still, inside a statement released around the weekend, Morneau said the G20 ministers “made good progress on advancing policies to bolster the worldwide economy.”

“I received very positive feedback on Canada’s new path for long-term growth, and recognition that when the center class thrives, we all thrive,” he said.

He added the government’s March 22 budget – the very first because the Liberals, led by Justin Trudeau, came to power – “will demonstrate Canada’s commitment to making smart and necessary investments to be able to grow the economy and make a real difference for that middle-class and the most vulnerable.”

That policy path includes tax breaks for middle-class families, increases towards the Canada Child Benefit for all those with low-incomes and spending on infrastructure projects.

To do that, the Liberals ran on the campaign to return Ottawa to some deficit – a shortfall that is now expected to be $18.4 billion within the coming fiscal year, up from the promised $10 billion deficit.



Many economists, however, believe the government will need more firepower to prevent Canada sinking into another recession. They suspect that spending level could rise up to $30 billion or more in only the very first year of the government’s four-year mandate.

Meanwhile, previous structural reform commitments through the G20 were designed to add two percent to global growth by 2018. So far, the International Monetary Fund has predicted that growth is only going to reach 0.8 per cent in that timeframe.

“The worldwide recovery continues, however it remains uneven and falls short in our ambition for strong, sustainable and balanced growth,” according to the communiqu, released at the conclusion of G20 talks on Saturday.

“Monetary policies will continue to aid economic activity and ensure price stability,” the group said, but added that “monetary policy alone cannot result in balanced growth.”

Indeed, the financial institution of Canada – led by governor Stephen Poloz,  who also attended the G20 summit – has cut its key lending rate twice previously year, both times by 25 basis points, first in January 2015 and again the next July.

The central bank rate is now at 0.5 per cent and expected to remain there until policymakers can better gauge the impact of the federal government’s economic plan.

During the G20 meeting, IMF md Christine Lagarde emphasized the need for structure reform has become “even more pressing given the disappointing state from the global recovery.”

“Our research finds that for that more advanced economies, reforms that foster technology and innovation may have the best pay-off,” Lagarde said in an address in Shanghai. “For emerging market economies, strengthening property rights and capital markets might be more relevant.”

Despite these goals, the G20 didn’t support calls for a co-ordinated global spending package that could help limit the chance of global financial trouble, similar to that observed in 2008-09.

“(But) we’ll make use of all policy tools – monetary, fiscal and structural – to bolster growth, boost investment and ensure stability in markets,” the G20 communiqu said.

In an argument, the Finance Department said Morneau “encouraged his G20 counterparts to apply long-term growth strategies.”

In Shanghai, also, he met with Canadian business leaders “to discuss making more global opportunities for Canadian businesses to develop and thrive on the international stage,” the minister’s office said.

gisfeld@nationalpost.com

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