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Canada warns of tricky outlook as G-20 talks open

Surojit Gupta in New Delhi

Canada's central bank chief said on Friday weak US and Japanese demand made the world economic outlook "tricky" as rich and poor nations began a financial summit against the backdrop of a possible war in Iraq.

"It's going to be a tricky nine months for the world economy," Bank of Canada Governor David Dodge told Indian executives in New Delhi. "Looking further (ahead) we have to be more optimistic.

"We have to say thank God for Asia as demand growth in the United States is weak" as well as in Japan, he told the Confederation of Indian Industry, a leading lobby group.

"We have to recognise 2002 and first half of 2003 will not be a period of particularly buoyant demand in the world," he added.

Dodge was in the Indian capital for the fourth annual summit of finance ministers and central bank chiefs from the Group of 20, which is due to discuss how to cut off funds for terrorism, boost global trade and combat financial crises.

"Different groups are facing different economic situations. For the United States and Britain it is growth and how to achieve higher growth while Argentina is grappling with crisis," finance secretary S Narayan told reporters ahead of the meeting.

"We will try and address a wide area of financial and economic concerns."

The three-year-old G-20 -- 19 nations plus the European Union, as well as the World Bank and the International Monetary Fund -- accounts for more than three quarters of the world's people and gross domestic product.

Mix of rich and poor

The G-20 groups Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, Korea, Turkey, the United States and the European Union.

Officials will draft a communique on Friday which is likely to be discussed and finalised by ministers on Saturday.

US Treasury Secretary Paul O'Neill will attend the summit but some ministers from key members of the group of seven richest nations will be absent.

The G-20 was established in 1999 in the wake of the emerging markets financial crises of the late 1990s.

The summit will provide an opportunity for India to showcase the attractions of Asia's third-largest economy, although India trails far behind China.

China attracts $30-40 billion of foreign investment a year. In contrast, India draws just $3-4 billion.

Economists say reforms are crucial if India is to increase annual growth from 5.4 per cent and cut poverty in a country whose population of more than a billion is second only to China, which is expected to post eight per cent economic growth this year.

(Additional reporting by Penny MacRae)

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