FROM THE OFFICE OF PUBLIC AFFAIRS

The Central Bank Governors and Treasury/Finance Ministers of Canada, Mexico, and the United States today convened the fourth meeting of the North American Financial Group (NAFG). The Ministers and Governors reviewed financial and economic developments in the three countries and discussed the implications of recent financial instability in Asia for their economies. They highlighted the strong economic performances of all three countries over the past year and agreed that the three economies faced good prospects for continued growth during the coming year despite the financial crisis in Asia.

The Ministers and Governors noted that the United States economy completed its seventh straight year of expansion, with strong growth, little sign of inflationary pressures, and rates of unemployment that remain near their lowest level in almost a quarter of a century. Sound monetary and fiscal policies, including what may well be the first balanced budget in a generation this year, are contributing to the ongoing strength of the U.S. economy.

The Ministers and Governors remarked upon Mexico's strong economic performance last year, including 7 percent growth and a continued decline in inflation. They expressed confidence in Mexico's outlook for solid growth and lower inflation again this year, supported by continued strong fiscal and monetary policies, and concluded that economic disruptions in Asia were not likely to threaten that positive outlook. They agreed that Mexico's recent budget cuts were an appropriate and timely response to lower oil prices. They remarked upon the continued expansion of trade between the three countries and noted that last year Mexico became the United States' second largest export market, second only to Canada.

The Ministers and Governors noted Canada's ongoing fiscal progress, reflected first in the elimination of borrowing requirements in fiscal year 1996-97, the first balanced budget in 30 years, and in the current fiscal year, the implementation of a debt repayment plan. Canada's fiscal success and low inflation have created the conditions for continued strong growth and job creation. This view is shared by major international organizations, which expect Canada to lead the G7 in growth again this year.