(Archived Content)
FROM THE OFFICE OF PUBLIC AFFAIRS
JS-1464
Good morning. I was very pleased to host fellow G7 Ministers and Governors here in Washington.
The unifying theme of our discussions was economic growth. Thestrengthening global recovery provided an upbeat backdrop. The UnitedStates is leading the way, thanks to President Bush’s jobs and growth taxrelief program. Last month, 308,000 jobs were created. Growth accelerated to 6.2 percent in the second half of 2003 – the fastest in almost 20 years.
Business investment posted double-digit increases in the same period.Manufacturing activity is increasing. Productivity growth remainsexceptionally high. Homeownership is at an all-time high, the economy isgenerating jobs, and unemployment has declined.
Growth in the first quarter of this year is expected to be in the 4 to 5% range, according to private sector estimates. What’s more, in my view, there is still a lot of headroom for this economy to grow and expand in a non-inflationary way.
Beyond the United States, there is also good news. Japan has turned inseveral good quarters, as has the United Kingdom. In continental Europe,there are some encouraging initial signs of an upturn, but growth still lagsin too many areas and thus needs to be more broad-based.
We all agreed today that now is the time to redouble our efforts tostrengthen and broaden growth for the future. We reviewed the progress made under the Agenda for Growth, including, key steps on tax reform, and labor markets flexibility. But we also agreed that additional pro-growth reforms are essential to boost employment and raise incomes. We focused in particular on the importance of low marginal tax rates in encouraging jobcreation and income growth.
Of course, sound fiscal policies are also fundamental to sustained growth,and we underscored the need for fiscal consolidation during times ofexpansion. In the United States, we are operating with an unwelcome, butmanageable and understandable, short-term deficit which we are taking action to reduce dramatically. I reiterated President Bush’s commitment to deficit reduction, which will cut the deficit in half over five years, restoring itto a level below the 40-year average in terms of the size of our economy.
Economic fundamentals are also strengthening in many emerging marketscountries and higher global growth will reinforce the gains from strongerpolicies. Countries should take advantage of current favorablecircumstances to implement reforms that will help achieve lasting stability.
Turning to development, the Bush Administration has consistently emphasized the powerful role that the private sector can play in promoting growth.
This was a key driver of discussions over the last two days. We urged theMDBs to step up their efforts to and promote more financing for smallbusinesses – which can play a key role in creating jobs and growth. And we took the unprecedented step, along with other members of the Development
Committee, of meeting with entrepreneurs from developing countries. Theirstories were compelling and should help inform work in this area goingforward.
We also stepped up our work on remittances. Remittance flows, at nearly$100 billion globally, exceed total official development assistance and arecritical sources of income for millions of households in many developingcountries. Yet, many barriers exist that make sending money expensive andlimit the potential development impact of the funds. We are each workingto address these barriers in our own countries. Today, we committedtogether to work with other governments, the private sector, and the MDBs to broaden access to financial services in developing countries. This meansfacilitating greater competition in remittance services, encouragingincreased participation in the formal financial system, and promotingfinancial deepening in the recipient economies.
As part of our Strategic Review of the international financial institutions,we agreed this weekend to build on recent reforms – including collectiveaction clauses, transparent limits on large scale assistance, and theincreased use of grants by the World Bank – and to explore new directionstoward a modern international financial policy framework. This includesimproving IMF assessments of economic policies and potential risks andrefocusing the IMF and World Bank on their core mandates. We wantinstitutions that deliver results based on modern management principles andthat contribute to stronger growth and higher incomes for people throughoutthe world. We will develop these themes further as we prepare for SeaIsland.
I had a very positive and constructive meeting with the Finance Minister ofIraq, Kamel al-Kaylani, and Central Bank Governor Sinan Al-Shabibiyesterday. They are making considerable progress – enacting a new central bank law based on international best practices and liberalizing interestrates. Significant progress has also been made on licensing foreign banksand they are working on a T-bill market. Both Iraqi officials reported thateconomic progress continues to take place in their country and I was pleased to hear about the ongoing economic and financial reconstruction. Our commitment to support Iraq is unwavering.
The recent tragic events in Madrid and Riyadh underscore that combating the financing of terrorism remains a priority. Ministers and Governors metwith senior officials from key countries, the World Bank, the IMF, theEuropean Commission, and the Financial Action Task Force to discuss how to improve our asset freezing regimes, stop cross-border transfers of cash to terrorists, and provide attractive alternatives to underground moneytransfers. We strongly welcomed the IMF/World Bank commitment tocomprehensive assessments of the entire anti-money laundering and terrorist financing standard.
The economic challenges in the greater Middle East are a key focus.Regional ministers will join us for dinner this evening to discuss economicreform – notably how to work together to advance financial sector reform and private sector growth. I expect strong support for economic reform efforts in the region, as well as for the needs of Iraq and Afghanistan.
The G-7 Action Plan released in February demonstrated the internationalcommunity’s stalwart commitment to Afghanistan. The recent donors’conference in Berlin, which raised pledges of $8.2 billion over three years,further stressed that commitment. The Afghan authorities have entered intoa staff-monitored program with the IMF, providing a detailed framework fortheir policies.