Thursday, June 08, 2006

Bye-Bye G-8 And Putin; Hello Chinese And Saudi Arabian Economic Areas

"China and Saudi Arabia have been named as two of the five economic areas that will participate in the International Monetary Fund’s efforts to resolve the world’s glaring trade imbalances. The other three participants will be the economic superpowers of the US, the eurozone and Japan.

The IMF said this week that this new group of five systemically important economic areas for the global economy would engage in its first “multilateral consultations” aimed at “how to address global imbalances while maintaining robust global growth”.

The announcement casts a shadow over the gathering of the Group of Eight finance ministers in St Petersburg on Friday, since it points to the irrelevancy of the G8 in solving the world’s biggest economic problem.

Rodrigo Rato, the IMF managing director, said that the five economies had been chosen and had agreed to participate because their co-operation was crucial for the imbalances to be reduced.

“These economies are either ones with large current account surpluses or deficits, or they represent a large share of global output,” he said.

“Their co-operative action can play a major role in the orderly unwinding of these imbalances and in sustaining global growth as savings, consumption and investment patterns adjust.”

China’s trade surplus doubled in 2005 to exceed 7 per cent of gross domestic product, according to the IMF, making it an indispensable part of any resolution of the imbalances.

Saudi Arabia, as the world’s largest oil exporter with a current account surplus of 28 per cent of GDP in 2005, will represent oil producing countries, which have accounted for the most rapidly growing surpluses over the past two years.

Although G8 finance ministers meet at least four times a year to declare their latest thinking on the world’s economy, most of the individual members are peripheral to global imbalances.

The UK and Canadian economies are too small, while the IMF’s decision to include the eurozone alone shows that Germany, France and Italy can play a part in resolving imbalances only as part of a wider economic area.

The multilateral consultations will start with IMF staff visits to the five economic areas, focusing on spillovers and linkages among these and other economies, rather than on domestic economic issues. The IMF hopes to reach a conclusion by the end of 2006."

Chris Giles "IMF begins push to tackle global imbalances" Financial Times, June 8, 2006


To listen to Arabic Classical Music and to Hundreds of Traditional Arabic songs, see this link and click on classical and traditional Arabic music sub-links on left of page: saudi_arabia.htm

Saudi Arabia Riyadh Al Bathaa Masmak Fortress

Saudi Arabia, founded in 1932, is known as "the land of the two holy mosques" for the cities of Mecca and Medina which are Islam's two holiest places.

Photo credit: DHD Multimedia Gallery. With thanks. places-and-sights/_more2002...


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