Global growth outlook conceals imbalances: Chidambaram

Sridhar Krishnaswami

WASHINGTON: The Union Finance Minister, P. Chidambaram, has said that while the outlook for global growth may remain above the trend level, it conceals the emergence of sharper imbalances and other risks.

In a statement to the International Monetary and Financial Committee, he said that indications were that the American economy would maintain its growth during the current year, but in the euro area business sentiments remained fragile and consumer demand sluggish.

"Recovery appears to have lost momentum in Japan, though a revival of demand is a possibility given the encouraging trends of business and consumer confidence. Growth rates in Asian Emerging Market Economies (EMEs) aided by various factors, including strong domestic demand and liberalisation of textile trade, are likely to remain strong."

Mounting debts

Mr. Chidambaram, who is the leader of the Indian delegation to the Spring Meetings of the IMF and the World Bank, said the fiscal deficit and public debt of many industrialised nations not only continued to be high but had also gone up in some instances.

"What is worrying is that the consolidation prospects for 2005 also do not appear encouraging."

There are several downside risks that could temper the optimism of sustained global growth, which include exchange rate volatility and further rise in commodity and oil prices.

"As a developing country, I must voice my profound disappointment that the oil-producing countries and other developed countries show little concern for the burden that high oil prices put on our development efforts," Mr. Chidambaram said.

The Minister was critical of the institutional arrangements for decision making of the Fund that still remains "heavily weighted" in favour of developed countries.

"The international community must pay attention to the hard reality that the arrangements evolving in the financial architecture cannot operate successfully without equal partnership between developed and developing countries or between economies with surplus capital and capital shortages."

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