Financial markets are calmer, but world economy faces risks
WASHINGTON (AP) — The world economy is still sluggish. But at least markets are calmer and China's economic problems look more manageable than they did when the world's top finance officials met in February.
Finance ministers and central bankers from the Group of 20 major economies emerged from their meeting in Washington on Friday relieved that financial markets had recovered from that turbulence.
"I came away feeling a little more encouraged than when I arrived," Bank of Canada Governor Stephen Poloz told reporters.
The G-20 discussions took place as part of the spring meetings of the 189-nation International Monetary Fund and the World Bank. Talks will wrap up Saturday.
Early this year, world markets were being rattled by a drop in the Chinese currency and by tumbling oil prices, both of which seemed to signal deep troubles for the global economy.
Since then, the yuan and oil prices have stabilized, and China on Friday said its economy registered solid 6.7 percent growth the first three months of 2016.
The respite from market tumult does not mean all is well with the world economy.
The IMF on Tuesday downgraded its outlook for the global economy this year and issued a list of risks that could make things worse: Conflict in the Middle East. A refugee crisis in Europe. The possibility that British voters will decide in June to pull their country out of the European Union. A growing political backlash in the United States and Europe against international trade.
Japanese Finance Minister Taro Aso said that the world's financial markets are starting to regain "composure" but "downside risk" persists. He expressed particular concern about risks from volatility in capital flows and foreign exchange rates.
Japan is concerned about the value of the yen, which has risen rapidly this year against the dollar despite an unusual move by the Bank of Japan in February to introduce negative interest rates in an unsuccessful effort to spur flagging growth and keep the yen low to boost exports.
Even China's solid first-quarter numbers raised fears the Chinese government is backsliding on commitments to reform its economy. Critics worry it pumped up the first-quarter numbers by investing heavily in inefficient state-owned companies — an approach that could drag down growth in the long term.
Global finance officials are seeking to address the political backlash against globalization, which has helped propel the presidential campaign of Republican front-runner Donald Trump in the United States and a campaign in Britain to leave the EU.
In a statement Friday, the G-20 pledged to pursue policies that will bolster growth and further stabilize financial markets, but they offered no new measures to accomplish these goals.
The IMF is urging countries to launch a new round of public works projects to improve roads and other types of infrastructure in hopes the higher government spending will boost growth. But in an era of high budget deficits, that call has not met with much support. In Friday's communique, the G-20 did not offer any new proposals on infrastructure spending.
"The United States cannot and must not be the only engine of growth," U.S. Treasury Secretary Jacob Lew said. "All major economies need to deploy a full tool kit of economic policy measures."
The G-20 statement repeated a goal to increase transparency of all countries on tax matters — an issue that taken on urgency following the recent release of the Panama Papers showing the widespread use of tax havens by the world' rich and powerful.
Associated Press writer Matthew Pennington contributed to this report