US Treasury Secretary John Show presented Opening Remarks at Money Magazine’s “Money Summit” sponsored recently in New York.
He took the opportunity to comment on the current state of the U.S. economy, and to share his thoughts on “where it is going”.
Although the real pick-up was foreshadowed for the second half of the year – in large part due to the US President’s Jobs and Growth Plan – GDP reportedly rose by 1.9% in the first quarter of 2003. Annualised growth rates near to 3.5% are projected by the later part of this year.
The Treasury Secretary expressed confidence that President Bush’s plan is going to have a serious impact on overall economic growth and job creation in the United States this year. *”Bottom line is: I am confident we’re going to see those ‘help wanted’ signs go up again in greater and greater numbers,”* he said.
Specific indications cited were:
·the trade deficit has narrowed;
·consumer sentiment is up;
·interest rates have stayed low keeping the housing market strong;
·corporate profits are rebounding;
·productivity has stayed strong, which bodes well for future income growth and living standards;
·there are signs of renewed capital spending
*”I think the markers are all there for a strengthening labour market as growth accelerates this year.”* said Secretary Snow.
On global growth prospects, Mr. Snow admitted that the industrialised nations of the world are growing far too slowly and that everyone suffers as a consequence.
Earlier this month at a G-8 Summit, President Bush pointed out that the United States wishes economic success for all its partners, and that the developing world in particular needs faster growth from all of the more advanced economies. It has been the policy of the current US administration to encourage economic growth at home and abroad.
According to Secretary Snow, the challenge today is that the leading economies are suffering from a growth deficit; however, their potential far exceeds their performance. *”Returning these economies to high growth performance has been and will continue to be our focus. We expect others to take bold actions themselves – including fundamental structural reforms where necessary – to spur growth, create jobs and contribute to global prosperity.”*
Noting that the United States has come a long way from the beginning of this year, Mr. Snow concluded, * “this is a hopeful time for America.”*
The International Monetary Fund published a Statement on the conclusion of its 2003 Article IV Consultation with the US last week, indicating that *”The U.S. economy has continued to provide valuable support for global growth,”*– although the recovery has been uneven, and short-term prospects remain uncertain. The IMF nevertheless expects US economic growth to rise above its potential rate in the latter half of 2003 and into 2004.
According to IMF staff reports, by responding effectively to the challenge of managing short-term risks to the outlook – while establishing a credible approach to coping with longer-term fiscal pressures – the U.S. will help promote growth as well as domestic and external sustainability. They say this will be in line with the G7 Finance Ministers’ commitment to cooperate to promote **global** economic growth.
Eduardo Aninat, the IMF’s Deputy Managing Director has predicted that global growth in 2003 will likely remain below trend at about 3%, before “picking up” to about 4% in 2004.
Without question, the uncertain global environment inhibits growth and development of every economy, that of The Bahamas included. So said Prime Minister and Minister of Finance Perry Christie as he presented the nation’s 2003-2004 Budget to Parliament. *”Consequently, we must be careful and patient in our expectations as long as this uncertainty continues. But we firmly believe that our prudence and patience will pay off in the sustainable development of our economy.”*
According to the Prime Minister, the 2003/2004 Budget reflects the continuing commitment of the Government of The Bahamas to sound macroeconomic and fiscal management in a world of great uncertainties. This commitment, he said, is indispensable to safeguarding social harmony, incomes and employment and can be regarded as the key to future development.
With this backdrop, the budget for the new fiscal year incorporates measures to contain the deficit and gradually eliminate it over a reasonable period of years. For the Administration, it represents the first step in implementing a sustainable fiscal policy taking account of the less promising global environment which has developed in recent years. The reduction in deficit will be achieved by a combination of expenditure containment and revenue enhancement measures. *”We can do little to change that environment but we can behave sensibly and respond positively to the new challenges and opportunities. And that is what we intend to do,”*said Mr. Christie.
The Prime Minister points out that it is essential for The Bahamas to continue to demonstrate to the international community that it is very serious about bringing the fiscal situation under firm control. *”The Bahamas has an A3 Rating from Moody’s Investor Services, and we should not jeopardise that rating in any way.”* The A3 Rating on international or foreign currency obligations is considered invaluable in that it confirms that the Bahamian economy is fundamentally sound, and that The Bahamas is an attractive environment for international investment.