Global economic outlook clouded

Washington, September 10 :

To keep the global economy growing, finance ministers and central bank governors from the world’s largest economies have to do a better job of working together to reduce widening trade imbalances and resolve other vulnerabilities, the head of the Institute of International Finance (IIF) said today.

In a letter to the ministers and governors who will be meeting in Singapore later this week, Charles Dallara, who leads an association more than 360 financial institutions, said their talks come at a time of ‘heightened uncertainty about the global economy.’ He said growth in the US, the world’s largest economy, is slowing, and that while the performance of Japan and euro-zone economies has been encouraging, “world economic prospects are heavily dependent on the extent of the US slowdown.”

Dallara said the economic outlook is further clouded by inflationary pressures and persistent global imbalances, a reference to such issues as the growing US trade deficit and huge foreign reserves that China and other Asian economies are building up.

Noting the deadlock in the current round of global trade negotiations, he said, “addressing the imbalances will be far more difficult in a protectionist world. Hence the successful conclusion of the Doha Round and meaningful progress on imbalances are both essential if the broad benefits of globalisation are to be sustained.” The Doha round, named for the Qatari capital where talks began in 2001, are aimed forging a global trade treaty, but they collapsed in July, largely over how to cut farm trade barriers.

Dallara’s letter was sent to Britain’s finance minister Gordon Brown, who heads the policy-steering committee of the IMF, which is holding its annual meeting in Singapore with its sister institution, the World Bank.