Central bankers from the world's richest countries said yesterday that recovery in the leading economies was likely to be delayed until next year.

Acknowledging the slower pace of recovery, the bankers said they nevertheless did not expect the global economy to slip back into recession, in spite of fears of a "double dip" in the US.

"It is not a strongly negative situation. I do not think there was anybody talking in terms of double dip," said Sir Edward George, chairman of the Group of 10 central bankers and governor of the Bank of England. "The uncertainty in the financial markets has certainly produced the view that the pace of recovery had slowed and was likely to continue to be slower."

The bankers, meeting in Switzerland at the Basel-based Bank for International Settlements, said they expected economic growth in the US to pick up speed this year but that a 3 per cent growth rate was unlikely to be reached until next year.

They said turmoil in the financial markets damped prospects for recovery in Japan in spite of improved economic indicators. Growth would be slow and dependent on the strength of its exports, particularly to the rest of Asia, said Sir Edward.

Mr Masaru Hayami, Bank of Japan governor, pulled out of the meeting at the last minute, ahead of yesterday's meeting by Japan's economic council to discuss anti-deflation measures.

In the summer, they had expected euro-zone growth to reach 2.5 per cent by the end of the year but said yesterday this was likely to be delayed until 2003.

US reports suggest the US economy experienced little growth in August, except in productivity and home and car sales, which were bolstered by a renewed drop in interest rates.

Although government figures released yesterday showed that inventories among US wholesalers jumped in July for the second consecutive month and at the fastest pace in 20 months, data expected next week on retail and factory-level stockpiles could show weak growth or a drop in business inventories overall.

Sir Edward said the bankers' views did not take into account the economic consequences of possible military action against Iraq, which had not been discussed at the bi-monthly meeting at the Bank for International Settlements, which provides services to central banks.

"What we see is a nervousness in financial markets, that's in the oil price and is a factor affecting stock markets." - (Financial Times Service)