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IMF-World Bank Hold Annual Meetings in Washington - 2002-09-26

Finance ministers from the major powers are gathering in Washington for meetings running through Sunday at the International Monetary Fund. The central issue is the sluggish pace of world economic growth and the risks of further slowdown.

It is the threat of war in Iraq that has sent oil prices to $30 a barrel, a price higher than what even OPEC has said is desirable. The IMF says recession in Japan and sluggish conditions in Europe are holding down world economic growth. But Paul O'Neill, the former corporate executive who is the U.S. treasury secretary, says the U.S. economy is headed towards rapid growth.

"When I meet with my G7 (Group of Seven) colleagues I will report that I believe the U.S. economy is on the bumpy road to recovery," he said. "I remain convinced that we're on a path to three to three and a half percent real growth by the end of this year. And I look forward to hearing from my colleagues what they intend to do to spur growth in their own economies."

The Group of Seven includes the four big west European powers, Canada, the United States and Japan.

Another optimist is University of North Carolina economist Jim Smith. Mr. Smith told a Washington press conference that he is certain that a war with Iraq is coming. But that contrary to expectations by many, he believes oil prices will collapse once the fighting has stopped.

"And oil prices will fall probably well below $20 a barrel and there's not much that the other members of OPEC can do to stop that," he said. "Lower energy prices add to economic growth. Lower interest rates add to economic growth. We've got a 40-year low in interest rates."

Mr. Smith agrees with Mr. O'Neill that U.S. economic growth is set to accelerate.

Horst Kohler, the IMF managing director, points out that a U.S. attack on Iraq need not derail the global recovery. He told reporters that oil prices are high now mainly because of the uncertainty about what will happen in the middle east.

Police in Washington are braced for up to 20,000 anti-globalization protesters who have indicated they would like to disrupt the World Bank IMF meeting.