Finance ministers from around the world are gathering in Washington for the spring meetings of the International Monetary Fund and World Bank. VOA economic correspondent Barry Wood reports policy makers are confronting the twin problems of slowing world growth and rising inflation.
With world economic growth already slowing to its weakest pace in five years, there is worry that the financial crisis that started with defaults in the U.S. home mortgage market last August could worsen. IMF economists call the current credit squeeze the worst financial crisis since the great depression hit the United States in the 1930s.
IMF Managing Director Dominique Strauss-Kahn says that in addition to a slowdown, many countries are confronting sharply higher prices, particularly for oil and foodstuffs. He says policy makers face difficult choices.
"Policy makers have to choose," he said. "The answer cannot be the same for everyone, since in some parts of the world the problem is more economic slowdown. And in some other parts of the world the problem may be more the risks of inflation."
World Bank President Robert Zoellick says that for many developing countries rising food prices are imposing sudden and painful cutbacks.
"In just two months rice prices have skyrocketed to near historical levels, rising by about 75 percent globally and more in some markets, with more likely to come," he said. "In Bangladesh a two-kilogram bag of rice like this [holds up bag at press conference] now consumes about half of the daily income of a poor family."
In addition, says Zoellick, wheat prices have risen by 120 percent in the past year. Oil prices, which were projected to decline after the Iraq war, have instead risen by 400 percent in the past five years.
Inflation, the economic slowdown and the continuing credit squeeze will be the main topics for multiple meetings of economic policymakers beginning Friday. While no solutions are expected, ministers will be examining economic data, looking for clues as the likely direction of both economic growth and inflationary pressure.
U.S. Treasury Secretary Henry Paulson, who will chair a meeting of finance ministers from seven of the world's wealthiest countries, said Thursday that the U.S. economy has turned down sharply and could weaken further. Many economists say the U.S. economy has already entered its first recession since the short and subdued downturn of 2001.