FROM THE OFFICE OF PUBLIC AFFAIRS

The Central Bank Governors and Treasury/Finance Ministers of Canada, Mexico, and the United States today convened the sixth annual meeting of the North American Financial Group (NAFG). The Ministers and Governors reviewed recent financial and economic developments in all three countries over the past year and agreed that developments have been very favourable. All of their economies are experiencing strong growth with low or declining inflation.

The Ministers and Governors noted that Canada's commitment to sound fiscal policies and low inflation continues to pay off in the form of stronger economic growth and job creation. The Canadian economy grew 4.5 per cent in 1999 and growth has averaged 4.9 per cent over the first two quarters of 2000. Solid economic growth has been accompanied by robust job creation that has pushed the unemployment rate down close to its lowest level in 24 years. Despite the strong growth, core inflation remains in the lower half of the 1 to 3 per cent target range. The 1999-2000 fiscal year marked the third consecutive year that the Canadian federal budget was in surplus, the first time since the late 1940s and early 1950s that three consecutive surpluses have been recorded. These surpluses have put the debt-to-GDP ratio on a sharp downward track.

The Ministers and Governors noted that, for the fifth consecutive year, economic growth in Mexico has been strong alongside declining inflation, and rising employment and real wages. In 2000, real GDP growth is forecast to reach around 7 per cent, inflation is expected to be below 9 per cent, and the government deficit is projected to fall below the target of 1.0 per cent of GDP. In addition, the current account deficit remains moderate and continues to be financed mostly with foreign direct investment. They welcomed the decision by Mexico to repay all of its outstanding balances to the Fund and to treat the remaining portion of its IMF agreement as precautionary, which they agreed was made possible by the strong performance of Mexico's economy and finances. That performance also prompted a private rating agency to confer investment grade status on Mexico's long-term sovereign debt for the first time ever.

With respect to the upcoming political transition, the Mexican authorities remarked that their demonstrated commitment to implement sound fiscal and monetary policies provides the conditions for an orderly transition to the next administration. The Ministers and Governors of Canada and the United States support the commitment of the next Mexican administration to continue to implement prudent macroeconomic policies, maintain a sustainable growth rate, reduce the budget deficit and pursue supportive policies as the Bank of Mexico works to lower inflation levels.

With respect to the United States, the Ministers and Governors noted that as the economic expansion continues for a record 10th year, growth is starting to slow a bit from recent extraordinary gains to a more sustainable pace. Productivity is growing rapidly, raising standards of living while keeping inflationary pressures contained. Employment continues to expand and the unemployment rate is holding near a 30-year low. The strong economy and sound fiscal policies resulted in a third consecutive federal budget surplus in fiscal year 2000, the first such occurrence in more than 50 years. As a consequence, the ratio of debt held by the public to GDP has fallen by 25 per cent over the last three years. The Ministers and Governors observed that to maintain the momentum of the expansion, fiscal discipline should be maintained, monetary policy should continue to be prudent, and national saving should increase.

The Ministers and Governors exchanged views on the challenges posed by the increasing integration of capital and trade markets, and they also discussed the impact that current conditions in the oil market might have on the global economy. They reviewed the measures implemented by the three governments in order to contribute to the stabilization of international financial markets and to the promotion of sustainable long-lasting world economic growth.