BASEL, Switzerland, 9 September 2003 — The world’s top central bankers yesterday signaled that a global economic recovery was starting to take hold but voiced doubts about whether it will last. “The economic conditions have improved, we are very encouraged by the accumulating signs of a recovery,” Jean-Claude Trichet, spokesman for the G-10 group of central banks said after a regular meeting here.
“The problem is the sustainability of this recovery in the medium and the long term,” the governor of France’s central bank added. Trichet cited growing levels of consumer confidence and an acceleration of investment as signs that a recovery was under way worldwide, but cautioned that they were still fragile.
While most of the indications were emerging from the United States, the central bankers hinted that they were looking towards Asia for an alternative to the US to maintain a recovery.
“China is the engine of the global economy,” Trichet said after the meeting at the Bank for International Settlements, adding that the economic prospects for the world’s most populous nation were “good”.
The central bankers warned that European countries were lagging behind, with a pickup only expected to come into full swing on this side of the Atlantic early next year.
“The pickup is in the pipeline,” Trichet said, adding that it would materialize in Europe in 2004 following stronger growth in the third and fourth quarters of this year.
While the US economy had performed “better than expected”, Europe’s economy had disappointed during the second quarter, “but there is a feeling it is getting better”, he added.
European Central Bank governor Wim Duisenberg had signaled during the meeting that he was maintaining his growth forecast of 0.7 to 0.8 percent for the euro zone during 2003 “or just below”, Trichet said. But Japan, long criticized for its depressed economic climate, had posted better growth results, signaling a turnaround in the country’s economy, the central bankers found. “It confirms that something is happening,” Trichet commented.
Intra-Asian trade was running at high levels and much of it was generated within the region, the central bankers noted. Trichet’s doubts about the medium- and long-term focused on the climate for entrepreneurs and consumers, warning that a halt in their spending drive would jeopardize the extent of the forthcoming recovery.
It was the first time that Trichet had chaired the meeting of the G-10 committee, following the retirement of Sir Eddie George from the helm of the Bank of England. The committee meets every two months at BIS headquarters in Basel to review the state of the world’s economy.