RUSUTSU, Japan &
Leaders of the Group of Eight economic powers warned today that surging oil and food prices could undermine world growth but that the global economy would ultimately be resilient.
In a communique released after a morning discussion about economic issues, the leaders called on petroleum suppliers to boost production and refining and to increase investment in oil exploration and output over the medium term.
The G-8 &
which groups the U.S., Britain, Japan, France, Germany, Canada, Russia and Italy &
also called for diversifying sources of energy and further efforts to improve energy efficiency.
"We remain positive about the long-term resilience of our economies and future global growth," the communique said, noting that growth in emerging economies remained strong.
"However, the world economy is now facing uncertainty and downside risks persist," it said.
"We express our strong concern about elevated commodity prices, especially of oil and food, since they pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable, and increase global inflationary pressure," it said.
Since the G-8 leaders met last year in Germany, the world economy has deteriorated dramatically amid accelerating inflation, a credit crisis and plunging markets. Many experts say the it is in the worst shape since at least the Asian financial crisis of 1997-98.
"You just have to look at stock markets around the world to see how much faith people are putting in these pronouncements from the G-8," said David Cohen, a regional economist with Action Economics in Singapore.
"The markets are braced for stagflation &
higher oil prices boosting inflation and dragging down economic growth." On Wall Street, the Dow Jones industrial average has fallen to nearly two-year lows, while Japan's benchmark Nikkei 225 index just recently suffered a 12-day slide, its longest in 54 years. Most Asian markets fell today, and major European indices slid more than — percent in morning trade on persistent worries about the credit crisis.
San Francisco Federal Reserve President Janet Yellen said in a speech Monday the financial markets remained fragile, and that it will take time for conditions to improve.
For their part, the G-8 leaders noted in their statement that financial market conditions had improved somewhat in recent months but said "serious strains still exist." Upon arriving for the three-day summit in northern Japan on Sunday, President Bush acknowledged that the American economy was "not growing as robustly as we'd like." But he also was hopeful that Washington's $168 billion stimulus package, including tax rebates for people and tax breaks for businesses, will pull the economy out of its slump.
During the morning session at the summit devoted to economic issues, the leaders reached no clear consensus on the reasons behind the doubling of oil prices over the last year, said Yasuo Kodama, the press secretary of Japan's Foreign Ministry. Some attributed oil's rise to growing demand and tight supplies and others stressed the role of speculation, he said.
To enhance energy security, the leaders proposed an energy forum focused on energy efficiency and developing new technologies. No further details were available.
But there was no discussion of the subprime mortgage crisis in the U.S., Kodama said.
The morning session on economics came after the summit's first day focused on aid to Africa, and a lunch where climate change was the main topic.
The leaders briefly touched on food security, stressing that Africa's agricultural output was vital, Kodama said. They planned to discuss the subject more as the summit progressed.
They also said biofuel production &
which some have partially blamed for the run-up in oil prices &
should be conducted in a sustainable manner, he said.
Some people have questioned the effectiveness of calls from the G-8 to boost oil production when the group does not include Saudi Arabia, the world's largest exporter of crude, or any OPEC members.
French President Nicolas Sarkozy, a proponent of expanding the G-8, told reporters five emerging economies &
China, India, Brazil, Mexico and South Africa &
will play a bigger role at the next summit.
The leaders of those countries will join the summit for a full day next year in Italy, he said, up from half a day this year &
Sarkozy said the leaders "exchanged a great deal on the subject." Italy proposed including the emerging countries for a full day next year, and he said the pitch "was accepted by everyone."
The leaders recognized sovereign wealth funds as increasingly important participants in the world economy and welcomed recent commitments by these government-owned investment funds to improve transparency.
G-8 worried about food, oil
RUSUTSU, Japan &