World

Bill Morneau says Canadian economy to rebound this year

Canada's economy should rebound "over the course of the year" from the impact of the Fort McMurray, Alta., wildfire, Finance Minister Bill Morneau said on Saturday on the sidelines of a G20 meeting in Chengdu, China.

Brexit, Donald Trump candidacy hang over G20 meeting in China

Minister of Finance Bill Morneau says Canada wants a strong trade agreement with the U.K. (Sean Kilpatrick/Canadian Press)

Canada's economy should rebound "over the course of the year" from the impact of the Fort McMurray, Alta. wildfire, Finance Minister Bill Morneau said on Saturday on the sidelines of a G20 meeting in Chengdu, China.

The fire is estimated to have cut daily oil production by more than 1 million barrels and the Bank of Canada estimates it will shave 1.25 percentage points off economic growth in the second quarter.

"We were approximately right in our expectations in our budget," he said of Canada's fiscal plan introduced in March, which promised growth spurred by government spending. Speaking to reporters by telephone, Morneau said the country's growth was also challenged by global uncertainty following Britain's vote last month to exit the European Union, but that was offset by the strong U.S. economy. 

Morneau also said Canada wants a separate trade deal with Britain. Canada is finalizing a free trade agreement with the EU, which negotiates on behalf of member states. Britain's decision to leave the bloc means it has to eventually forge such deals on its own.

"We seek the opportunity to develop a strong trade agreement with the United Kingdom, and that's something that I know my colleague [International Trade Minister] Chrystia Freeland will be working on," Morneau said.

At the summit, the world's leading economies agreed to do more to lift global growth and share the benefits more broadly, as they sought to deal with fallout from Brexit and counter dissatisfaction with globalization.

Trump hangs over meeting

Finance ministers and central bankers are discussing how to confront global challenges exacerbated by Britain's decision to leave the European Union.

The spectre of protectionism, highlighted by U.S. Republican presidential candidate Donald Trump's "America First" rhetoric and talk of pulling out of trade agreements, also hangs over the meeting.

"The recovery continues but remains weaker than desirable. Meanwhile, the benefits of growth need to be shared more broadly within countries to promote inclusiveness," the G20 ministers said in a draft communique seen by Reuters on Saturday.

The draft, which is subject to change before it is expected to be issued at the end of the meeting on Sunday afternoon, said Brexit added to uncertainty in the global economy but G20 members were "well positioned to proactively address the potential economic and financial consequences".

U.S. Treasury Secretary Jack Lew said it was important for G20 countries to boost shared growth using all policy tools, including monetary and fiscal policies as well as structural reforms, to boost efficiency.

Fiscal, monetary tools less effective

"This is a time when it is important for all of us to redouble our efforts to use all of the policy tools that we have to boost shared growth," Lew told reporters.

Chinese Finance Minister Lou Jiwei called for more co-ordination to promote sustainable growth, as fiscal and monetary tools were becoming less effective.

"G20 countries should increase policy communication and co-ordination, form policy consensus and guide market expectations, making monetary policy more forward-looking and transparent and increase the effectiveness of fiscal policy," Lou said.

Taro Aso, Japan's deputy prime minister, arrives for a meeting at the G20 Finance Ministers and Central Bank Governors conference held in Chengdu, China. The meeting was the first of its kind since the Brexit vote. (Ng Han Guan/Reuters)

The G20 meeting was the first of its kind since the Brexit vote and a debut for Britain's new finance minister, Philip Hammond, who faced questions about how quickly the U.K. planned to move ahead with formal negotiations to leave the EU. Many countries are worried that a long delay could add to uncertainties that are dragging on the world economy.

The International Monetary Fund this week cut its global growth forecasts because of the Brexit vote. Data on Friday seemed to bear out fears, with a British business activity index posting its biggest drop in its 20-year history.

"I hope that there is going to be clarification about the timing and process of the divorce. The sooner the better so this generates a new equilibrium," Italian Economy Minister Pier Carlo Padoan told Reuters.

Ministers call for speedy Brexit

French Finance Minister Michel Sapin said even though Britain was not prepared for Brexit, its response time should not be indefinite. And German Finance Minister Wolfgang Schaeuble said it should not fall to other countries to spend more to try to cushion the blow of Britain's exit.

"I believe that is a matter that the Britons need to deal with themselves," he said following talks with Hammond.

Lew, in a meeting with Japanese Finance Minister Taro Aso, reiterated the need for G20 members to refrain from competitive devaluations, as had been agreed at a G20 meeting in February.

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