The world’s most powerful economic policymakers meet behind a wall of security here Friday to plot a recovery course through turbulent global markets, a threat of war in Iraq and stumbling growth.
Group of Seven nations meet against the backdrop of a risk-laden, but still growing global economy before they join partners from the 184-member International Monetary Fund and World Bank for a weekend of talks.
Police squad cars lined the streets outside the concrete and glass IMF and World Bank buildings in downtown Washington, where a massive security cordon is warding off threatened anti-globalisation protests.
Demonstrators from radical groups who brought havoc to a World Trade Organisation summit in Seattle in November 1999 have vowed to stop the top officials getting around Washington for the key meetings.
But despite the outside protests and global economic uncertainty, IMF managing director Horst Koehler urged policymakers to avoid despair in the meeting rooms of the G7 and IMF-World Bank talks.
”Prospects for the global economy have clearly weakened amid considerable financial market volatility,” he told a news conference.
But it would not be productive in our view now to dwell in undue pessimism or even doom or gloom,” he said. Global economic output is projected to grow 3,7% in 2003, down from the IMF forecast in April of 4% growth, the IMF said in a semi-annual report released in the run-up to the meetings.
It tipped growth of 2,8% this year, unchanged from the previous forecast despite a surprise spurt in growth at the start of this year.
”The global economy has shown remarkable resilience in the face of multiple shocks of the past two years,” Koehler said.
”There are still good reasons to expect the recovery to continue in the two years ahead.”
Fears of war in Iraq would not derail the recovery, he said.
”Of course the problem is uncertainty in this situation, and discussion about war will not reduce uncertainty,” he said.
”But we do not think that this has an immediate impact on the recovery. We expect the recovery to go ahead. The IMF will not be disturbed by these discussions.”
The impact of the US economy on the world had grown over the past decade, Koehler said.
”Therefore if growth is slow here or uncertain in parts here in the US economy, that is of course a shadow for the global economy, more than ever,” he said. However, he warned against underestimating the potential for recovery, given the flexibility and forward-looking nature of the US economy.
Faster growth in Japan and Europe would help to narrow a yawning shortfall in the US deficit on its current account — the widest measures of a country’s international trade and financial flows, he added.
”I would like to take this opportunity to ask our Japanese member, our European members to accelerate growth,” Koehler said.
China was contributing to growth and stability in Asia, he said. ”What is also encouraging is that in Asia there is now an intraregional trade expansion, which is good for the world economy,” he said.
Despite the global uncertainties and weakness in Latin America, there was strength in Asia and stability in eastern Europe and the transition economies, Koehler said.
”All over the map, the picture is not as bad as sometimes the doom and gloom scenario would look like.”
Ahead of the meetings, Afghan Finance Minister Ashraf Ghani met with donors here, later telling reporters he had received pledges for tens of millions of dollars to help finance Afghanistan’s budget and speed up reconstruction projects.
The exact scale of the extra funds would be defined during the weekend meetings, he told a news conference.
The priorities for Afghanistan are an expected $166-million shortfall in its budget by March 2003 and the need to begin building projects so people can see progress, he said. – Sapa-AFP