Concern over slowing global growth

KOBE (JAPAN), JAN. 13. Finance Ministers from Asia and Europe began two days of talks on Saturday, mixing concerns about the slowing global economy with less-urgent debate on the sort of exchange rate regimes developing countries should adopt.

The abrupt slowdown in the U.S. economy, Asia's largest export market, and renewed weakness in Japan have lent urgency to the Asia-Europe Meeting (ASEM) even though Ministers insist there is no risk of a repeat of Asia's gut-wrenching 1997 financial crisis that plunged the region into deep recession.

International Monetary Fund managing director, Mr. Horst Koehler, told Finance Ministers from the 25 countries that the global economic expansion of the past two years was slowing and Europe and Japan should do more to promote sustained global growth. ``It is clear that the strong world economic expansion of the past two years is losing momentum,'' Mr. Koehler said. ``But... it would be an exaggeration to embark on doomsday scenarios now.''

Last year's spike in oil prices, the slowdown in the U.S. and the stalling recovery in Japan had ``increased the downside risks in the global economy'', he said. A European official said presentations to the opening session were peppered with realism, with Britain's junior Finance Minister, Melanie Johnson, commenting that growth had peaked across the globe, presenting policy-makers with tougher challenges. The European Economic Affairs Commissioner, Mr. Pedro Solbes, was positive, saying there was a good chance inflation would turn out to be lower than the commission has forecast if the euro continues to appreciate. ``Everybody is concerned how this year the world economy will turn out. The concern, of course, centres on the U.S. economy and whether it will continue to be the engine providing the growth for the world economy, particularly in the face of a Japanese slowdown,'' Thailand's outgoing Finance Minister, Mr. Tarrin Nimmanahaeminda, said.

Thailand and other countries across the region are lowering their growth forecasts for 2001 as the extent of the U.S. slowdown becomes clearer, but Mr. Tarrin expressed hope that lower oil prices would help to cushion the blow. One of the pressing issues for Asian Ministers this weekend will be to gauge the impact of recent weakness in the yen. Some economists have expressed concern that if the Japanese currency continues to slide, other Asian countries that compete with Japan in export markets like America could be badly squeezed. But Mr. Tarrin played down the risk. Because most Asian currencies have floated freely since the 1997 crisis, they were likely to adjust to movements in the yen, he said. Moreover, if further U.S. interest rate cuts follow last week's decisive half-point cut by the Federal Reserve, the dollar could weaken, Mr. Tarrin said.

- Reuters

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Section  : International
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