In 2009, officials agreed on coordinated stimulus to help put an end to the financial crisis. The 2016 Shanghai G20 summit is being compared to that in 2009, nearly seven years ago. The question ahead of the two-day summit this weekend in Shanghai is whether the agreement is still on the run.
“The Group of 20 nations must plan now for a coordinated stimulus program to keep a slowing global economy from stalling,” said International Monetary Fund staff said in a report on Wednesday.
IMF staff also mentioned global economic growth was slowing and financial conditions were tightening for emerging economies, where commodity exporters have been hard hit by an economic slowdown in China.
Governments around the world may need to create new financing mechanisms to help some emerging market and commodity exporting countries that are highly vulnerable to reversals in the flows of money, the IMF staff said.
A review will be conducted by the IMF this year on how countries should manage capital flows. IMF will also pay its attention on the sources of capital and funds.
Financial markets have faced tons of worries since the beginning of the year. Besides the plummet of crude oil prices and uncertainty of the U.S. election, there are still lots of uncertainties in the market, such as falling equity markets, volatile currencies and signs of economic weakness throughout the world. These factors are the G20 nations need to focus on in the two-day summit.
“If you look around the world, you’ve got slow growth. We have virtually every country trying to devalue against the dollar. Commodity prices are declining because of too much supply. And all this does feed into a considerable threat of deflation which scares the daylights out of central banks,” said bearish investor A. Gary Shilling in an interview for the current environment.
The G20 nations could be able to make some progress on excess resources, such as crude oil, steel and coal. Countries in the summit could introduce incentives to curtail outputs in these resources and other sectors with excessive capacity. Needless to say, China must be one of the key player in any aspect under the current economic environment.