Financial markets are calmer, but world economy faces risks

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Source:   —  April 16, 2016, at 11:01 AM

But at minimum markets are calmer and China'south economic problems see more manageable than they did when the world'south top finance executive met in February.

Financial markets are calmer, but world economy faces risks

The world economy is still sluggish. But at minimum markets are calmer and China'south economic problems see more manageable than they did when the world'south top finance executive met in February.

Finance ministers and central bankers from the Grouping of twenty major economies emerged from their meeting in WA on Friday relieved that financial markets had recovered from that turbulence.

"I came far feeling a tiny more encouraged than when I arrived," Bank of Canada Gov Stephen Poloz told reporters.

The G-20 discussions took space as portion 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 % growth the first three months of 2016.

The respite from market tumult doesn't imply 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 create things worse: Conflict in the Center East. A refugee crisis in Europe. The opportunity that British voters will determine in June to draw 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'south financial markets are starting to regain "composure" but "downside risk" persists. He expressed specific concern about risks from volatility in capital flows and foreign exchange rates.

Japan is concerned about the cost of the yen, which has risen rapidly this year against the dollar despite an different move by the Bank of Japan in Feb to introduce negative interest rates in an unsuccessful effort to spur flagging growth and hold the yen low to boost exports.

Even China'south 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 executive 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'll sustain growth and further stabilize financial markets, but they offered number new measures to achieve these goals.

The IMF is urging countries to launch a new circular of public works projects to make better 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 hasn't met with much support. In Friday'south communique, the G-20 didn't proposal any new proposals on infrastructure spending.

"The United States cannot and mustn't be the only engine of growth," U. S. Treasury Secretary Jacob Lew said. "All major economies necessity to deploy a full tool kit of economic policy measures."

The G-20 statement repeated a goal to expand transparency of all countries on tax matters — an issue that taken on urgency following the recent release of the Panama Papers showing the widespread utilize of tax havens by the world' wealthy and powerful.

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