ZURICH -- David Mulford, under secretary of the U.S. Treasury, said he sees signs of economic recovery in the United States and expects a reduction in the budget deficit once the recovery takes hold.
"We are now seeing important signs of a moderate U.S. recovery," Mr. Mulford told the Swiss-American Chamber of Commerce on Monday at its annual meeting.
As evidence, he cited the 2.5% annual rate of increase in real gross domestic product for the first quarter, improved consumer confidence, four consecutive monthly rises in industrial production, and subdued inflation.
"Short-term interest rates remain low, U.S. productivity grew nearly 3% in the first quarter of this year, and our personal savings rate has begun to rise," he added.
Dealing with Deficit
Mr. Mulford said the federal budget deficit, at some 6% of gross domestic product, was still a daunting problem but he expects it to be reduced "as recovery takes hold and expenditures related to our financial-sector problems diminish."
He warned that the U.S. could not single-handedly engineer world growth, particularly as its exports to major trading partners are slowing.
Mr. Mulford said the U.S. saw economic growth in both Europe and Japan as slack. He said there is scope for Tokyo to use its budget surplus to stimulate domestic demand.
"Reliance on export-led growth to make up for domestic slack is no longer politically or economically sustainable," he said.
East Europe's Prospects
Mr. Mulford said that if the United States, Europe, and Japan successfully established the basis for sustained economic growth, a successful integration of the new states of eastern Europe and the former Soviet Union would be possible.
Mr. Mulford said that Russia's negotiations with the International Monetary Fund over economic reform were urgent and that an agreement should be reached in weeks rather than months.