January 14, 2003	Tuesday	Ziqa'ad 10, 1423

BASEL, Jan 13: The world economy will see modest growth this year, Eddie George, governor of the Bank of England and spokesman for the G10 central bankers, said here on Monday, adding that the financial markets were anticipating a short war in Iraq.

“We are seeing slow but relatively steady growth in the world economy in 2003,” George said after a regular meeting of the central bankers taking place at the Swiss-based Bank for International Settlements (BIS) here.

Commenting on the economic impact of a possible war in Iraq, he said he did not want to speculate, adding that central banks can only react as events unfold.

However, he said: “The markets have already anticipated that there will be a war and that it will be short.”

The trend in oil prices was an indication of this, he added.

Central bankers were conscious of the risks for the markets from the uncertainty linked to Iraq, George said. Much of Monday’s discussion had been focused on the risks.

The economic impact would depend on whether any conflict was lengthy or short-lived, he said.

“But there is not a great deal you can do to anticipate that kind of risk,” he added, saying, however, that central banks would make sure monetary policy accommodated developments if growth turned out to be more sluggish than expected.

George predicted economic growth would pick up later in the year in the United States and Japan and then spread to the euro zone.

Although figures for growth were not given during the meeting, George said that his estimates made in September 2002 remained valid.

At that time, he had said the euro zone was set for two-per cent growth in 2003 and the US should see growth of about three per cent.

George indicated that the central bank chiefs had been informed of the situations in Argentina and Brazil, where, he said, positive developments had been noted.

Argentina slumped last year into a deep recession after defaulting on its external debt and Brazil has been struggling to maintain investors’ confidence that it will continue making debt payments.

Referring to Brazil, he said: “There have been some concerns in the market, they disappeared already because the new administration has shown a stability-oriented policy.”

HE ADDED: “They are not throwing money in an uncontrolled way.”—AFP