Wealthy nations vow to encourage economic growth

IMF, World Bank present positive outlook for global upturn despite some risks

April 25, 2004|By Warren Vieth and Jon Marino | Warren Vieth and Jon Marino,LOS ANGELES TIMES

WASHINGTON - The world's wealthy nations promised yesterday to take new steps to promote growth in the global economy as financial leaders launched two days of deliberations at the International Monetary Fund and World Bank.

"We share the increased optimism regarding the global recovery," said Sudan Finance Minister Elzubier Ahmed Elhassan, briefing reporters inside the IMF headquarters. "But we need to remain vigilant. ... Poverty is a major contributor to global instability."

Finance ministers and central bank governors from the Group of Seven industrial nations emerged from a morning summit to declare that the global recovery was gathering speed, but remained subject to such risks as high oil prices, rising interest rates, geopolitical conflicts and signs of economic overheating in China.

"Rising energy prices can have a negative effect on world GDP growth," said U.S. Treasury Secretary John W. Snow, remarking on a run-up that has pushed the spot price of oil as high as $38 a barrel in recent weeks, compared with about $26 a year ago The rise has contributed to gasoline prices exceeding $2 a gallon in California and other areas.

Although the increase has been attributed in part to OPEC production cuts, Snow said it appeared global oil production was roughly in balance with consumption and that replenishment of depleted inventories was driving the recent price spiral.

IMF economists issued a report on the eve of the weekend meetings projecting that the world economy would grow at a relatively robust rate of 4.6 percent this year. But they cautioned that every $5 increase in the price of oil would trim the growth rate by 0.3 percent.

The G-7 countries - the United States, Canada, Britain, Germany, France, Italy and Japan - pledged to take additional steps to promote global economic growth and boost employment, including tax, spending and labor market reforms and a renewed commitment to reducing trade barriers.

Although other countries have criticized the United States for contributing to global financial instability by running up big budget and trade deficits, Snow insisted that the administration was committed to sound fiscal practices and was taking steps to shrink the shortfall.

The G-7 ministers and IMF overseers promised to work together to combat terrorist financing, help fund the reconstruction of Iraq and Afghanistan, foster economic development throughout the Middle East, and improve strategies for reducing global poverty, such as providing more aid in the form of grants rather than loans, and working in partnership with Third World entrepreneurs and small businesses.

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