G8 upbeat on global growth despite jitters
By Brian Love and Douglas Busvine
ST PETERSBURG, Russia (Reuters) – Finance ministers from
the G8 economic powers predicted a year of strong economic
growth on Saturday despite high oil prices, skidding U.S. stock
prices, rising interest rates and fears of inflation.
Meeting in St Petersburg, the ministers said in a
communiqu© that economic growth was healthy and becoming more
broadly based despite oil at $70 a barrel and imbalances — one
of which is the big U.S. trade deficit, another China’s trade
“Global economic growth remains impressively strong
overall,” U.S. 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.”
Financial markets seem more alarmed than the G8 politicians
about short-term prospects.
The Dow Jones stock market index finished its worst week in
a year on Friday as investors, rattled by inflation warnings
and fears that U.S. 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 liberalization
talks but the words rang hollow as countries such as Brazil
said they could fail if developed countries did not give more
The world economy is forecast by the International Monetary
Fund to grow 4.9 percent this year, the best since 1976 apart
from an exceptionally strong 2004, with growth boosted by
rising stars like 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 versus other
currencies, 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 toward 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. The euro started the year at around $1.18, rose
to around $1.30 in mid-May or by about 10 percent, and has
eased in recent days to around $1.26.
China, the world’s fourth-largest economy and second
largest oil consumer after the United States, was among several
non-G8 countries invited to the deliberations in sunny St.
Petersburg and was represented by Jin Renqing, finance
The G8 countries, comprising host Russia, the United
States, 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
“We discussed the current situation in the energy markets
and the risks that high oil prices pose for the global economy
going forward,” the communiqu© said, urging more investment in
the sector by both oil producing importing countries.
The talks pave the way for a mid-July summit that marks
Russia’s first turn at the helm of the Group of Eight, a club
into which it was admitted after the fall of the Soviet Union.
President Vladimir Putin has made energy security the top
issue of the summit in St Petersburg on July 15-17, but is
under pressure to prove a reliable partner after Russia
temporarily closed the taps on gas exports to Ukraine early
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 recognize
that urgent progress is needed for its achievement,” it said.
The challenge that entails was immediately evident.
Brazilian Finance Minister Guido Mantega said nothing would
happen if there were no concessions on aid to farmers, where
Europe and the United States are in the firing line.
Mantega, saying he was talking behalf of China and India as
well as his country, told reporters: “Our three countries have
agreed that if there are no strong indicators of these advances
with regard to agriculture the Doha round will fail.
DROP THE DEBT
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.
“We call for enhanced coordination among all members of the
growing donor community, and alignment of aid programs with
partner countries’ development priorities,” the communiqu©
“We urge all donors to take account of debt sustainability
issues in all their lending practices and share fully
information on their lending to low-income countries.”
China is now making inroads in Africa and a report issued
recently by the OECD cited one deal whereby Angola got a
17-year loan of $2 billion from Chinese state lender Eximbank
at low interest rates on condition it use it to buy goods from
Chinese firms, whose offers often undercut South African
and European rivals by up to 50 percent, accounted for one
third of the work contracted out on a major road-building
project in Mozambique, the report said.
(with reporting by Gleb Bryanski, Tamawa Kadoya, Sumeet
Desai, Glenn Somerville, Louise Egan, Gavin Jones, Swaha
Pattanaik, Gernot Heller, Darya Korsunskaya)