Global economy resisting oil surge

The global economy is growing at a dynamic pace and may even accelerate in 2006 as threats fade and companies step up investments, central bankers from major countries say.

European Central Bank president Jean-Claude Trichet said the surge in crude oil prices had failed to restrain economic output, trade prospects were improving and central banks had kept a lid on inflation expectations.

"The global economy proved very, very resilient in the eyes of governments and particularly resilient in the sharp run-up in energy prices," Trichet said after a meeting of G10 central bankers from the world's largest developed and emerging nations.

"There is a general confirmation among colleagues ... that global growth is continuing at a pace which is dynamic, and we don't even exclude that global growth could be a little bit higher in 2006 in comparison with 2005."

Trichet, who chairs the G10 session, even dropped trade protectionism from the litany of risks facing the global economy.

Trade ministers in December staved off a collapse in global trade talks with an interim agreement to continue working toward global liberalisation by the end of this year.

International Monetary Fund managing director Rodrigo Rato said another surge in oil prices from yesterday's level around US$64 ($92) a barrel did remain a risk to the benign outlook.

Other dangers were the underpricing of risk premiums in debt markets and a sharp unwinding of global imbalances including the huge US current account deficit. But overall Trichet's assessment was more upbeat than in many years - a view shared by many economists.

"Global growth is solid and becoming broader-based as the new year begins," was the prognosis from investment bank J.P. Morgan in a research report.

The central bankers did not discuss currencies, or China's plans to diversify its foreign exchange reserves, even though some financial market experts are concerned that if China slows its purchase of US Treasuries, it could trigger a destabilising greenback rout.

- REUTERS