WASHINGTON (AFP) - World finance chiefs meeting in Washington this week will express satisfaction with a rebounding global economy, but also highlight risks from surging oil prices, turmoil in Iraq and other factors.
Meetings this week of the Group of Seven finance officials and annual gatherings of the International Monetary Fund and World Bank also are expected to give greater recognition to China's economic clout, and to discuss further debt relief to the world's poorest nations.
IMF managing director Rodrigo Rato said recently that the organization was likely to upgrade its forecast for global economic growth. He said the outlook for 2004, set to be released Wednesday, would be "slightly above" the April forecast of 4.6 percent.
Rato noted however that "some downside risks have increased," including a recent spike in crude oil prices. But he said that even though some recent economic data had been below expectations, "the recovery should continue in 2004 and through 2005."
A recent cooling trend in the United States and some other countries, however, has given pause to some economic forecasters.
"The slowdown was most pronounced in the United States and Japan, but also evident in many other industrialized economies," said Nariman Behravesh, chief economist for the economics firm Global Insight.
Behravesh said that while global growth probably peaked earlier this year, "we do not expect that the recent 'soft patch' augurs the beginning of a much deeper downturn."
He said so far the rise in oil prices has had only a small impact on economic growth, China is still growing and that US economy "will probably not run out of steam soon."
But Morgan Stanley chief economist Stephen Roach sees a much more troubling economic picture.
"The world economy is on a collision course," he said in a recent essay.
"With the world's growth dynamic now being effectively driven by just one consumer, America, and just one producer, China, the odds are growing short that such an increasingly tenuous arrangement can be sustained."
The IMF, which holds its annual meetings over the weekend along with its sister institution, the World Bank, is expected to repeat its call for the United States to cut its fiscal and trade deficits, and for Europe and Japan to boost economic growth.
Economists point out that the US current account and budget deficits are a major threat, which could lead to a dollar collapse that creates economic turbulence.
Sung Won Sohn, chief economist at Wells Fargo Bank, said he does not see a catastrophic situation, but a potential for a slow deterioration in the US economy and living standards.
"The US will be able to raise enough money to fund the deficits. The issue is the source of funding and the price," he said.
"The US will rely increasingly on less-stable sources of funding and pay higher interest rates. It is a fait accompli that the dollar will depreciate further. The dollar depreciation will lead to higher inflation and interest rates, hurting the economy, including housing. If not corrected, our children might have to devote an increasing portion of their work day to pay interest, dividends and rents to foreign investors."
The G7 meanwhile indicated its finance ministers and central bankers will be joined by representatives from China for the first time at the G7 meeting Friday of Britain, Canada, France, Germany, Italy, Japan and the United States.
China's economic importance has been impossible to ignore for the G7. And the hope is that by allowing Beijing into G7 consultations, the Chinese economy will become more integrated into the international financial system.
Another key issue for the gatherings will be the deepening debt crisis of the poorest nations.
British Chancellor of the Exchequer Gordon Brown has said his government will unilaterally write off its share of debts owed to the World Bank and other development banks, urging other rich nations to follow.
The move comes amid growing calls to boost debt relief, or even to cancel all debts of the most impoverished nations.
The relief organization Oxfam said the IMF can accomplish this "with a stroke of the pen" by revaluing its 100 million-ounce gold stockpile, which Oxfam said is currently "absurdly undervalued at only eight billion dollars."
"The IMF knows that simply by revaluing its gold it could cancel billions of dollars in debts owed by poor countries," said Oxfam's Max Lawson. "The IMF is sitting on a golden stockpile it doesn't use while demanding debt repayments from poor countries that cannot provide basic education and health care."