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U.S. official: Economy to grow 4 percent for ’04

/ Source: The Associated Press

The U.S. economy will expand by 4 percent this year, sustaining the recovery begun in 2002, a senior U.S. Treasury official said Sunday. But he expressed concern about high oil prices and imbalances in the global trading system.

“In the United States, the economy has nearly completed its recovery from the 2000-2001 stock market crash ... and it is moving into an expansion phase,” U.S. Treasury Undersecretary John Taylor told a gathering of business executives in New Delhi.

“This year it is on track to complete the third year of recovery with a strong 4 percent growth,” Taylor said.

In the July-September quarter, the U.S. economy expanded by 3.9 percent, compared with 3.7 percent in the previous quarter.

Taylor said the U.S. growth story is not much different from what is happening elsewhere in the world.

“Japan, France, the United Kingdom, and Canada have also been growing well, though Germany unfortunately continues to lag,” Taylor said. He said developing countries such as India, China, Russia, South Africa and Brazil were also reporting impressive economic expansion.

Taylor, however, expressed concern about the strength of the global economic expansion, saying he worried about high oil prices and a lack of exchange rate flexibility in some countries.

U.S. deficit expected to narrow
He said the huge current account deficit in the United States, a key factor in the recent plunge of the dollar, will narrow as the Bush administration pushes policies to cut its budget gap and encourage private savings.

But “these policies should be matched by other countries with policies to raise economic growth and increase exchange rate flexibility,” he said.

Taylor did not name any country, but Washington has long complained that China artificially keeps the value of its currency low and thus causes imbalances in the global trading system.

High oil prices are another challenge, as rising inflation makes it difficult for central banks to continue with easy money policies to support economic expansion, he said.

“It is good news that [oil] prices have eased off the recent peaks. But this should not mean that we become complacent about developing policies to increase supplies,” he said.