G8 ministers predict year of growth despite inflation worries
Finance ministers from the G8 economic powers predicted a year of strong economic growth on Saturday despite high oil prices, skidding US stock prices, rising interest rates and fears of inflation.
Meeting in St Petersburg, Russia, the ministers said in a communique that economic growth was healthy and becoming more broadly based despite oil at $70 a barrel and imbalances such as the big US trade deficit as well as China's trade surplus.
"Global economic growth remains impressively strong overall," US Treasury Secretary John Snow added in a news conference at the end of the Group of Eight meeting.
"Although relative performance continues to be uneven, we are pleased to see that recoveries are strengthening in Japan and in Europe," Snow said.
Financial markets seem more alarmed than the G8 politicians about short-term prospects. The Dow Jones index finished its worst week in a year on Friday as investors, rattled by inflation warnings and fears US growth will soon slow, sold off. There was a big sell-off across many markets in mid-May.
The G8 meeting, to prepare for a summit next month, called for progress in the stalled Doha round of trade liberalisation talks, but countries such as Brazil said they could fail if developed countries did not give more ground.
The world economy is forecast by the International Monetary Fund to grow 4.9% this year, the best since 1976 apart from an exceptionally strong 2004, with growth boosted by India and China.
"I didn't notice any significant change in the degrees of concern and optimism," said Italian Economy Minister Tommaso Padoa-Schioppa. "However, it's true that worry about inflation has increased compared with a year ago."
IMF chief Rodrigo Rato, attending the talks too, said the dollar, which has been somewhat weaker of late, was now at more appropriate levels and that China would benefit from a more flexible currency system.
He described the recent declines in share and other assets as a correction towards a more realistic assessment of risks.
French Finance Minister Thierry Breton, fearing too strong a euro will hurt exports, welcomed recent developments in exchange rates.
China, the world's fourth-largest economy and second largest oil consumer after the US, was among several non-G8 countries invited to the deliberations and was represented by finance minister Jin Renqing.
The G8 countries - Russia, the US, Canada, Japan, Germany, Britain, France and Italy - called for efforts to find alternatives to oil and more secure supplies of energy generally, a point of tension within their own ranks.
"We discussed the current situation in the energy markets and the risks that high oil prices pose for the global economy going forward," the communique said, urging more investment in the sector by both oil producing and importing countries.
The talks pave the way for a mid-July summit that marks Russia's first turn at the helm of the G8. President Vladimir Putin has made energy security the top issue of the summit in St Petersburg on July 15 to 17, but is under pressure to prove reliable after temporarily closing the taps on gas exports to Ukraine.
Russian Finance Minister Alexei Kudrin, hosting the meeting on Saturday, urged energy consuming nations to guarantee greater stability of demand to help exporters.
The ministers sought to keep up political pressure for more efforts to break a deadlock in world trade talks: "We agreed on the importance for global growth of an ambitious outcome from the Doha Development Round and recognise that urgent progress is needed for its achievement."
But Brazilian Finance Minister Guido Mantega said nothing would happen if there were no concessions on aid to farmers, where Europe and the US are in the firing line.
The Chinese and Brazilians were in the firing line too over their increasing clout in the world as the G8 ministers said it was necessary for all to avoid burdening poor countries with more debts or loans tied granted in return for contracts. China is now making inroads in Africa, with offers by Chinese construction firms undercutting South African and European rivals by up to 50%. - Reuters