Analysis: Return to Growth Uncertain despite G-7 Recovery Hope

Washington, April 24 (Jiji Press)--Group of Seven top finance
officials held out a slender hope Friday that the worst downturn of the
global economy since World War II may be touching bottom, but the prospect
of a return to growth is still shrouded in uncertainties.

In a joint statement issued after their four-hour meeting in
Washington, the finance ministers and central bank chiefs of the G-7 key
industrial countries--Britain, Canada, France Germany, Italy, Japan and the
United States--noted "some signs of stabilization" in their economies.
The officials apparently welcomed positive indications such as a
slowdown in the pace of export declines and a recovery in consumer
confidence.
"Economic activity should begin to recover later this year amid a
continued weak outlook, and downside risks persist," the statement said.
The sentence makes the G-7 statement stand out in a conference
which many analysts say failed to produce impressive results.
This is the first time since the financial crisis deepened last
autumn that the likely timing of global economic recovery has been indicated
in a statement of a major international financial conference.
At the latest G-7 meeting, attention was focused on how
policymakers from the world's richest nations evaluate the current state of
the world economy and its outlook. Because the meeting was held only three
weeks after a Group of 20 financial summit in London on April 2,
expectations of fresh policy initiatives were low from the beginning.
In line with the cautiously upbeat G-7 statement, U.S. Treasury
Secretary Timothy Geithner, chair of the meeting, said after the meeting,
"Without underestimating the challenges we still face, there are signs that
the pace of deterioration in economic activity and trade flows has eased."
Geithner quickly added a note of caution. "We are right to be
somewhat encouraged, but we would be wrong to conclude that we are close to
emerging from the darkness that descended on the global economy" early last
autumn.
Bank of Japan Governor Masaaki Shirakawa also acknowledged that he
sees "some bright signs" in the world economy, referring to recent economic
data.
But at the same time, he said there is no change in the situation
marked by a strong negative feedback between real economic activity and the
financial system.
A senior official of the Japanese Finance Ministry pointed to
lending curbs by financial institutions as evidence of continued financial
strains. "No optimism is warranted" for the global economy, the official
said.
The cautious optimism expressed by the G-7 statement might provide
European countries, already reluctant about large-scale government spending,
with a convenient excuse for not taking additional economic stimulus
measures, some experts say.
But if the top finance officials cut corners in policy responses on
mere hints of life in economic activity, they would have to pay the price in
another downturn of the global economy.