February 9, 2016 / 8:17 PM / 3 years ago

Europe to call on G20 finance chiefs for urgent action on growth

BRUSSELS (Reuters) - European finance ministers will call on the Group of 20 biggest world economies at the end of February to boost global economic growth at a time when a slowdown in China is sending shivers through financial markets.

The European flag is projected on the government building in Tbilisi, Georgia, December 18, 2015. REUTERS/David Mdzinarishvili

G20 finance ministers will meet at the end of February in Shanghai in China, which holds the rotating presidency of the group, to survey the world’s economic outlook with its risks.

“Despite a moderate increase in world economic growth expected in 2016 compared to last year, the global economy is still facing considerable risks with global growth still falling short of expectations,” European Union ministers said in a draft document outlining their main message for the Shanghai meeting.

The International Monetary Fund last month cut its world economic growth forecast for this year and next, citing the slowdown and rebalancing of the Chinese economy, lower commodity prices and strains in some large emerging market economies.

Growth in China, the world’s second biggest economy, is to slow to 6.3 percent in 2016 and 6.0 percent in 2017 from 6.9 percent last year. This primarily reflects weaker investment growth as the economy continues to rebalance, the IMF said.

“In this context, we need to act urgently to secure a strong and durable global economic recovery and the delivery of the 2 percent additional growth ambition by 2018,” the ministers said in the draft due to be formally adopted on Friday.

During Australia’s 2014 presidency, the G20 agreed to implement reforms, called growth strategies, that would produce an additional 2 percent global economic growth over five years above 2013 growth levels.

“The G20 should undertake a critical mid-term review and if necessary adjust the growth strategies to ensure delivery of the growth ambition and address short- and long-term challenges,” the draft document, seen by Reuters, said.

“G20 countries should refrain from competitive devaluations and resist all forms of protectionism,” the ministers said.

The G20 has been repeating the same sentence about refraining from competitive devaluations for years.

This time, the call may gain additional meaning as China’s yuan currency is rapidly losing value because of the weaker growth outlook and capital outflow.

European Central Bank board member Benoit Coeure said on Monday the weakness in emerging market economies - which could trigger further depreciation of their currencies - would be discussed at the G20 in Shanghai.

“That’s an issue for global coordination and will be discussed in Shanghai in 10 days,” Coeure told French radio.

Reporting by Jan Strupczewski; Editing by Tom Heneghan

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