January 10, 2006	Tuesday	Zilhaj 9, 1426

BASEL, Jan 9: G10 central bankers concluded on Monday that “dynamic” growth in the world economy was set to continue and might even gain pace in 2006, European Central Bank chief Jean-Claude Trichet said.

Trichet, who had led a meeting of the G10 group of top central bank governors here, said bankers felt that “global growth is continuing at a pace that was dynamic and we even don’t exclude that global growth will be a little bit higher in 2006.”

“We will see. We remain very cautious, very prudent,” he told journalists after the bi-monthly meeting of the bankers to review of the global economy.

Trichet did not give any precise data. Earlier last year, the G10 had cited targets of about 4.0 per cent growth for 2005.

The ECB chief and G10 chairman emphasised that the world economy had weathered a sharp rise in oil prices to record levels last year.

“The global economy proved very resilient in the eyes of governors and particularly resilient to the sharp run-up in energy prices,” he said.

Trade and investment were also showing signs of gaining pace, but oil prices — which are vulnerable to unpredictable geopolitical shifts — were cited as one of the key risks that could undermine growth in the coming months.

The G10 also reiterated long-standing concerns about structural imbalances in the world economy and the under-pricing of risks by financial markets.

“We maintained we had to be vigilant about inflation,” Trichet added.

“Of course I am making the assumption that oil prices will stabilize at the current level. But there is a risk.”

However, the central bankers on Monday sidelined the risk of protectionism, which had been cited by Trichet as a possible adverse factor weighing on the world economy at the last G10 meeting in November 2005.

World Trade Organization members averted a potential collapse in talks on opening up markets for agriculture, services and industrial goods at a meeting in Hong Kong last month.

“World trade will continue to develop at a significant pace, perhaps also even accelerate slightly in 2006,” Trichet said.

Central banks were still trying to understand why nominal long-term interest rates remained low, the G10 chairman admitted, despite moves by the ECB and US Federal Reserve in recent months to increase their key rates.

So far they had only concluded that financial markets felt the policies adopted by central banks were credible, he added.

Trichet also cited lingering “prudence” in emerging economies following the Asian crisis in the 1990s, that boosted savings levels and led to a decline in the price of capital.

Investors were more cautious following the slump in buoyant financial markets in the early 2000s.

“Since then we might have timidity in the corporate sector as regards investment, which is taking into account this past experience,” Trichet said..—AFP