**John W. Snow
U.S. Treasury Secretary**
Speaking at the Centre for Strategic and International Studies in Washington today, U.S. Treasury Secretary John Snow provided an outlook for the global economy. He said global economic recovery has accelerated in the last six months, and that economic stability is also improving, with risks having diminished. *”Consensus forecasts put G-7 growth at 3.3% for this year, more than double the 2002 rate,”*said Mr. Snow.
This compares with United Nations’ projections for world economy expansion of 3.5%, following a less than 2% growth in 2001 and 2002, with 2.5% recorded in 2003. Similar to the US Treasury, the UN supports the view that *”the United States will remain the locomotive of growth in the developed economies.”*
The strengthening of the recovery in the U.S. has been attributed to the President’s tax cuts, which reportedly have provided the stimulus that was necessary to turn the economy around. Secretary Snow further feels they are now encouraging and allowing for the economic growth that is continuing into the future.
The following economic indicators all support Treasury’s view that the U.S. is on a path to sustained economic growth:-
· Economic growth in the second half of 2003 was the fastest since 1984;
· New home construction in 2003 was the highest in 25 years;
· Homeownership levels are at historic highs;
· Manufacturing activity is increasing;
· Inflation and interest rates are low;
· Jobs are coming back;
· The unemployment rate is falling;
· There was more than three trillion dollars of growth in value in the markets last year.
Beyond the United States, Japanese performance provided a positive surprise in the fourth quarter 2003, with growth hitting an annual rate of 7 percent. The United Nations says that in the case of Japan, many analysts have actually come to the conclusion that this is the first time the Japanese recovery is based on China, which has increased its “weight” in the world economy and its role in the current recovery. In continental Europe, where growth is still lagging, the indicators are positive, and Secretary Snow pointed out that it is important these positive signs become growth achievements this year. Additionally, many emerging market countries are also experiencing higher economic growth rates, along with reduced interest rate spreads and improved equity markets.
On the forecast, Secretary Snow said, *”Looking ahead, there is evidence that the momentum for growth continues to build. Financial markets have strengthened – in the U.S. and elsewhere. Inventories are low – suggesting the need to increase production to meet demand. And more investment is underway. More broadly, there is a more positive outlook, as geopolitical uncertainties have eased and forecasters see fewer downside risks.”*
The Agenda for Growth initiative launched by the G-7 focuses on supply-side reforms to boost productivity, raise growth and employment, and thereby increase living standards. They claim that while strong macroeconomic policies are vital, it is also essential to update microeconomic frameworks in the major economies to enhance the potential for sustained and healthy growth. With the chairmanship of the G-7 this year, Secretary Show feels the US has the opportunity to help lead change and bring results that facilitate global growth.
In The Bahamas, the Minister of State in the Ministry of Finance says *”We are fairly optimistic that we should see moderate economic growth this year. The major indicators should be pointing upwards in terms of tourism expenditure, and capital expenditure in the tourism sector from projects coming online.”*
Minister James Smith also has said the financial services sector should contribute to growth trends, having repositioned itself to compete effectively in the new environment of expanded regulatory and supervisory standards. In the near future, it is expected that new series of products and services would be offered within the financial services industry. *”At the end of the day,”* he said, *” this sector is expected to resume growth on an upward path and continue to provide high-level job opportunities for qualified Bahamians.”*