New considerations for China’s 2016 G20 Presidency

Abstract

The macroeconomic outlook that economic policymakers face remains highly challenging. The global economy is seemingly rooted in a perpetual low growth, high unemployment path, facing mounting risks and persistent vulnerabilities. Financial risks have abated somewhat in recent months, but major countries still face daunting policy challenges, and the direction of revisions to economic forecasts continue to be downwards. We are, in the words of Larry Summers, one major adverse shock from a global recession. At the same time, policy space is smaller than it was before the global financial crisis. Meetings are not being convened under crisis settings, but sovereign debt levels are higher, governments around the world are struggling to convince of the merits of structural reform, and although the potential for additional monetary policy stimulus has not been exhausted, there are growing concerns about the role that monetary policy is able to play. There is broad agreement that all three policy tools — monetary, fiscal and structural — are needed if the G20 is to achieve its goals of strong, sustainable, and balanced growth.