June 10 (Bloomberg) -- Finance ministers from the Group of Eight nations said the global economy is still ``strong'' after stocks tumbled and interest rates rose around the world.

Equities in the U.S., Europe and Asia fell this week on concern central banks will stifle economic growth as they boost interest rates to quell inflation, which Barclays Capital estimates is running globally at its fastest pace in a decade.

Ministers including John Snow of the U.S. and Germany's Peer Steinbrueck said ``global growth remains strong and is gradually becoming more broadly based,'' while acknowledging high oil prices and trade gaps threaten expansion, according to a statement released after two days of talks in St. Petersburg.

``There are concerns of a fragile global stock market,'' said Jodie Saul, an economist at CIBC World Markets in London. ``Ministers are obviously highlighting the strengths of the economy.''

Stocks fell as the central banks of the dozen euro countries, Turkey, South Africa, India and South Korea all boosted their benchmark rates this past week. The Federal Reserve is expected to execute its 17th straight increase this month and the Bank of Japan is signalling it will soon act for the first time in over five years

`Positive Development'

The Morgan Stanley Capital International Inc. World Index dropped 4.4 percent this past week, the biggest decline in a trading week since September 2002, as investors factored in the first synchronized tightening in global interest rates in six years. The index has declined 8.7 percent since reaching a six- year high on May 9.

``Despite some volatility in financial markets we're experiencing a very positive development of the world economy,'' Steinbrueck told reporters.

The outlook faces ``downside risks,'' from ``high and volatile energy prices and widening global imbalances,'' the statement said. The ministers omitted their view of April that inflationary pressures were ``contained,'' although Snow said the recent rise in prices wasn't ``alarming.''

``They have to be cognizant of the risks,'' said Andrew Cates, a global economist at UBS AG in London.

On oil, which has gained 32 percent over the past year and reached a record $75.35 a barrel in April, the ministers repeated a call first made two years ago for countries to increase investment in the energy sector, improve fuel efficiency and enhance market data.

Energy Statement

They released a separate statement on energy policy for developing nations with an agreement to ``take steps to alleviate energy poverty.''

The officials repeated ``global economic adjustment is a shared responsibility'' and that they are committed to closing disparities such as the $805 billion U.S. current account deficit, which is mirrored by surpluses in China and Middle Eastern oil-exporting countries.

After U.S. and European governments recently clashed over who is responsible for reining in the imbalances, Steinbrueck said today the G-8 didn't attach ``much weight'' to the U.S. budget and trade shortfalls.

Central bankers weren't at today's meeting, which was held to prepare a July summit of G-8 leaders. Their absence meant currencies were neither on the official agenda nor mentioned in the statement.

Exchange Rates

Japanese Finance Minister Sadakazu Tanigaki said abrupt changes in exchange rates are ``undesirable,'' indicating continued concern with the dollar's recent depreciation. French Finance Minister Thierry Breton expressed ``hope'' the euro wouldn't resume its recent climb. Snow called for ``flexible'' currencies, maintaining pressure on China and other Asian nations to let their exchange rates appreciate.

While the worldwide interest rate increases of 2000 helped trigger recessions in the U.S., Japan and Germany, the international economy is so far absorbing higher borrowing costs.

International Monetary Fund Managing Director Rodrigo de Rato told reporters today his institution still forecasts a global expansion of 4.9 percent this year, capping the strongest three-year stretch since the 1970s.

``Global economic growth remains impressively strong overall,'' said Snow, who was attending his final G-8 meeting before leaving the U.S. government.

Still, Adam Cole, an economist at RBC Capital Markets Ltd. in London, said investors were unlikely to ``take comfort'' from that as they continue to fret about inflation.

`Uncertainty'

Barclays' global gross domestic product deflator ran at an annual rate of 2.4 percent in the first quarter, up from 2 percent last year and the fastest since 1996. The U.S. publishes data on consumer and producer prices data for May next week.

``There is still a great deal of uncertainty about inflation, and markets will focus on that rather than soothing comments from finance ministers,'' Cole said.

The G-8 oversees two-thirds of the world economy and is composed of the U.S., Japan, Germany, U.K., France, Canada, Italy and Russia. Its leaders convene in July in St. Petersburg. Finance ministers and central bankers next meet without Russia as the Group of Seven in September in Singapore.

To contact the reporters on this story: Francois de Beaupuy in St. Petersburg at 155 or fdebeaupuy@bloomberg.net. Rainer Buergin in St. Petersburg at rbuergin1@bloomberg.net.

Last Updated: June 10, 2006 10:04 EDT