G-7 Officials Optimistic Over Global Growth

Finance officials from the world’s Group of Seven richest industrial countries expressed optimism Sunday that the global economy can achieve faster growth this year despite a recent rise in long-term interest rates.

In a chairman’s statement summarizing the discussions, Treasury Secretary Lloyd Bentsen said his colleagues believed that a variety of signs point to stronger growth with inflation remaining low.

“Collectively, we are more encouraged than we have been,” Bentsen said. “And I must say, I was pleased to hear the optimism around the table.”

British Chancellor of the Exchequer Kenneth Clarke, summarizing the five hours of discussions, said: “We thought, on the whole, things were very much better than they were 12 months ago. We were quite optimistic about the outlook.”

Clarke said he was encouraged by comments from German officials that the recession in that country has bottomed out. Canadian Finance Minister Paul Martin told reporters that all countries believed the economic fundamentals are “very, very good” and should lead to strong global growth.

Bentsen said the seven nations--the United States, Japan, Germany, France, Britain, Canada and Italy--pledged to continue pursuing policies put in place last year but did not indicate that any nation was willing to come forward with any new commitments.

The United States had been pushing Japan and Germany to do more to stimulate their domestic economies, given the unexpectedly deep recessions in both nations.

However, Japanese and German officials have so far resisted doing more, arguing instead that they have done enough and doing more would risk reigniting inflationary pressures.

The G-7 finance ministers and central bank presidents did have praise for the economic reform efforts put forward by Russia. Those commitments to restrain the government budget deficit and cut inflation led to a new $1.5-billion loan from the International Monetary Fund last week.

Russian Deputy Prime Minister Alexander Shokhin and other Russian economic policy-makers briefed the G-7 Sunday on the status of Russia’s reform program.

Bentsen said the Western nations welcomed Russia’s commitments to reduce the budget deficit to no more than 7.5% of the total economy this year and to bring inflation down to a monthly rate of 7% by year’s end.

Based on those commitments, Bentsen said the G-7 was urging the World Bank to accelerate new loans for Russia. He said the G-7 nations also stood ready to begin negotiations aimed at providing Russia with further debt relief in the form of a stretched out payment schedule.

He said the group had “made it clear to the Russians that if they are to attract private capital, they must put in place a stable and attractive investment environment that respects private property.”

On global growth, Bentsen said, “The bottom line was: We agreed the fundamentals are good, and we reiterated that inflation remains under control.”

That was a message clearly aimed at nervous financial markets which over the past two months have pushed long-term interest rates up sharply out of fears that growth, especially in the United States, has accelerated to such an extent that inflationary pressures will start rising.

The failure to come up with any new strategies to spur growth was not unexpected. Officials had predicted little new would come out of the talks, in part because Japan and Germany have been resisting calls from the Clinton Administration to do more to stimulate their own economies.

The discussions among the Group of Seven countries were held in advance of today’s start of the annual spring meetings of the 178-nation International Monetary Fund and its sister organization, the World Bank.

While IMF economists are forecasting that the global economy in 1994 should turn in its best performance in five years, that is due primarily to unexpectedly strong growth in the United States.