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Global growth to hit 4.5% in 2006

Finance ministers from Asia and Europe predicted another bumper year of global economic growth despite persistently high oil prices.

india Updated: Apr 10, 2006 11:53 IST

Finance ministers from Asia and Europe predicted another bumper year of global economic growth on Sunday despite persistently high oil prices.

At talks involving 25 European and 13 Asian countries, the Europeans also urged China to allow its currency exchange rate to rise in the name of fairer competition in world trade, but they were careful to not be seen to be bullying.

The ministers predicted a 4.5 per cent expansion of global economic output this year, their meeting host, Austrian Finance Minister Karl-Heinz Grasser, told a news conference.

That compared to 4.3 per cent growth in 2005, which was the best in decades and driven to a significant extent by rapidly developing economies such as China and India, where growth is three or four times faster than in industrialised countries.

A statement Grasser released as meeting chairman said global growth remained strong so far this year but that risks remained -- volatile oil prices, other imbalances, protectionism and a bird flu pandemic that has not so far materialised.

"Asia and the United States continuing to be the engines of global growth," the statement said.

"EU countries and Japan, while growing more slowly, also showed signs of domestic demand picking up and improving sentiment which should feed through to more robust activity," it said.

The International Monetary Fund is due to update its global growth forecast later this month but the comments from Vienna appeared to confirm how high it would put the cursor.

Asian Development Bank chief Haruhiko Kuroda, who attended the talks in Vienna, said growth in the Asian region outside Japan would hit 7.6 per cent this year.

Gently does it on yuan

Chinese Finance Minister Jin Renqing held a brief, separate meeting in Vienna with European Central Bank chief Jean-Claude Trichet, European Commissioner Joaquin Almunia and Luxembourg Prime Minister Jean-Claude Juncker.

The Europeans were keen to distance themselves from the more public and vocal tack Washington has adopted in appealing to the Chinese to ease state controls on the yuan's exchange rate and let the currency appreciate.

"We should try to convince (them of) what is necessary for the world economy and not push from the outside as ... in the past," Grasser said.

Another European official, asking not to be identified, made it clear Europe wanted to avoid megaphone diplomacy.

"We've got a more conciliatory approach than the Americans," the official said.

Grasser played it carefully.

"I don't want to put recommendations on the table, but I think that a more gradual flexibility of the yuan would be a good thing to have in order to work on the reduction of the global imbalances," he said.

Beijing, which steers the yuan closely rather than leaving it to the markets, implemented changes last July that allowed the yuan exchange rate to rise, but says it will make any further moves in its own time.

An official accompanying Jin repeated that line.

"Our government's position on yuan reform is a controlled gradual reform that is initiated by us," Wei Benhua, deputy head of China's State Administration of Foreign Exchange, said.

Free trade plea

The ministers reiterated pleas for progress on liberalising trade under the so-called Doha round of negotiations.

Those talks are deadlocked and one more trade spat hit the headlines at the weekend when China confirmed it had been asked to explain itself at the World Trade Organisation on US and European charges that it was hindering free trade in car parts.

Austria's Grasser and several other European ministers also used their three-day gathering in the Austrian capital to sell the merits of globalisation and denounce protectionism, inviting corporate executives to join in too.

Bernd Pischetsrieder, head of carmaker Volkswagen, Europe's biggest exporter, said it was vital for companies like his to cut costs to compete on world export markets and that this was why up to 20,000 jobs faced the axe.

Others said economic globalisation was creating lots of jobs and raising prosperity even if some wanted to seize on negative aspects to describe it as the root of all evil.

First Published: Apr 10, 2006 11:27 IST