G7 finance ministers warn of ‘uncertainty’ on global economy

G7 finance ministers have warned of “heightened uncertainty” surrounding the global economy and the need to address regulatory gaps in the banking system in the wake of financial sector turmoil.

“The global economy has shown resilience against multiple shocks,” finance ministers of the world’s most advanced economies said in their final communique after a three-day ministerial meeting in Japan on Saturday.

“Nevertheless, we need to remain vigilant and stay agile and flexible in our macroeconomic policy amid heightened uncertainty about the global economic outlook.” 

The finance ministers also noted the need to fill “data, supervisory and regulatory gaps” in the banking system that have come to light following the March collapses of Silicon Valley Bank and Signature Bank and the failure of First Republic in recent weeks.

The US and its G7 partners have made removing sanctions loopholes and combating evasion their priority in recent months as, more than a year after Russia’s full-scale invasion of Ukraine, the appetite for imposing restrictions on new parts of Russia’s economy wanes.

Against that backdrop, the finance ministers also agreed to strengthen sharing of intelligence on possible sanctions dodging, and monitor the effectiveness of the price caps on Russian crude oil and petroleum products. “We remain committed to countering any attempts to evade and undermine our sanction measures,” the communique said.

The G7 committed to provide economic support of $44bn to Ukraine, enabling the IMF’s approval of a four-year lending programme worth $15.6bn.

“It was a big achievement for us that the G7 was able to strengthen its unity rather than going in separate ways to address major international challenges,” Shunichi Suzuki, Japan’s finance minister, said on Saturday.

According to people briefed on the discussions, Brussels is also discussing restrictions on certain EU exports to countries that it suspects are re-exporting sanctioned products to Russia to prevent critical components from ending up on the Ukrainian battlefield.

Ahead of the finance ministers’ meeting, US Treasury secretary Janet Yellen had called for “co-ordinated action” by G7 nations against Beijing’s use of economic coercion. The G7 agreed to launch a framework for supply chain collaboration in clean energy by the year-end but the 14-page document contained no reference to economic security concerns related to China.

Yellen made the comments as Washington finalised a new outbound investment-screening mechanism aimed at China.

A senior Japanese finance ministry official acknowledged that the issue of economic coercion was raised during the meeting, but declined to comment on details and on whether China had been mentioned in those discussions.

Following Yellen’s remarks, China’s foreign ministry said on Friday that it was “the victim of US economic coercion”, citing sweeping export controls the US rolled out in October that would severely complicate efforts by Chinese companies to develop cutting-edge technologies with military applications.

“If any country should be criticised for economic coercion, it should be the United States. The US has been overstretching the concept of national security, abusing export control and taking discriminatory and unfair measures against foreign companies. This seriously violates the principles of market economy and fair competition,” spokesperson Wang Wenbin said.