The strength of the global economy is a big influence on Canada’s future financial health.Adrian Wyld/The Canadian Press
Finance Minister Bill Morneau has a lot riding on this week's trip to Shanghai.
As the new Liberal government prepares a March 22 budget at a time of slowing growth at home, Friday's gathering of G20 finance ministers and central bankers highlights the fact that most other developed economies are facing the same problem.
Over the past year, forecasts for growth have repeatedly been lowered in the United States, Japan, the euro zone and major emerging markets such as China and Brazil. Many nations are also dealing with lower-than-expected inflation, which hurts government revenue.
The International Monetary Fund sounded the alarm this week, urging G20 leaders to endorse "bold" action based on significant new measures to stimulate economic growth.
"These developments point to higher risks of a derailed recovery, at a moment when the global economy is highly vulnerable to adverse shocks," the IMF warned in a note to the G20.
The IMF urged nations to "reduce the over-reliance on monetary policy" by focusing on fiscal measures that encourage economic growth.
Fifteen months have passed since G20 leaders promised a 2-per-cent boost in global growth at the November, 2014 summit in Brisbane, Australia. Since announcing pledges to add more than $2-trillion (U.S.) to the global economy and create "millions of jobs," growth forecasts have moved in the opposite direction.
A senior Finance Canada official said Thursday that Mr. Morneau's focus will be on encouraging G20 members to deliver on those past promises.
For all of the attention in Ottawa on ramping up domestic policies in areas such as infrastructure and employment insurance, the strength of the global economy is a much bigger influence on Canada's future financial health.
"From a Canadian point of view, what happens on the world stage is of critical importance," said C.D. Howe Institute economist Craig Alexander. "To a large extent, the weakness we're experiencing in the Canadian economy is Canada importing the weakness from abroad. The Canadian economy is a very small open economy. We're only 3 per cent of the world economy, but we're a major trading nation. … One of the biggest stimulus programs Canada could have would be if international policy makers actually managed to lift the growth rates in their regions."
Friday's meeting of finance ministers and central bankers is the first G20 session hosted by China, adding a unique dimension to the gathering given the importance that China's domestic policy decisions have on the global economy.
The G20 also includes Saudi Arabia, and the meeting comes on the heels of Saudi oil minister Ali al-Naimi telling a Houston conference that oil prices will remain low and higher-cost producers will need to "get out" of the market. The comments were widely viewed as a reference to Canada's oil sands and the U.S. shale industry.
Oil is on the G20's agenda, along with combatting terrorist financing and cracking down on international tax evasion.
But promoting growth through short- and long-term stimulus will be the clear priority, according to the senior finance official.
Editor's note: an earlier version of this story incorrectly said Craig Alexander worked for the Conference Board of Canada. In fact, he is an economist with the C.D. Howe Institute. This story has been corrected.