Paulson : 2008 will be a difficult year

We must expect more bumps in the road. 2008 will be difficult year, with headwinds coming from slumping U.S economy, soaring commodity prices, and higher than deseriable inflation. It took time to build up recent excesses and it will take time to work through the consequences. It is critical for policy makers to put in place sound policy frameworks that support growth and enhance economic resilience ---- text Today's meeting takes place against the backdrop of considerable challenges to the global economy. In recent years, global economic conditions have been quite favorable, with growth averaging nearly 5% per year. 2008 will be a more difficult year, with headwinds coming from adjustments in the U.S. economy, financial market stress, higher commodity prices, and higher than desirable inflation. Downside risks will vary, and many European and emerging market economies have stood up relatively well so far to the recent financial turmoil, but no economy is entirely immune from global forces. In this context, it is critical for policy makers to put in place sound policy frameworks that support growth and enhance economic resilience. While I am confident in the long-term economic prospects of the United States, clearly for the moment, the risks facing the U.S. economy are to the downside. We are responding vigorously. First, we have adjusted macroeconomic policy to support the broad U.S. economy while the corrections take place in the housing and credit markets. The President and Congress responded with a bipartisan fiscal stimulus package that will inject more than $150 billion into our economy in the near term and boost GDP growth this year. Second, the Administration has supported a number of initiatives ?/SPAN> both private-sector led and public-sector initiatives ?/SPAN> in response to the housing correction, designed to prevent avoidable foreclosures and maintain viable credit markets while allowing the needed adjustment to proceed. Since last August, financial markets have been reassessing risk, re-pricing assets and de-leveraging. It took time to build up recent excesses and it will take time to work through the consequences. We must expect more bumps in the road. Global financial institutions are making progress, with some announcing write-downs and acting to raise capital. Additional disclosures of risks and material conditions and sound capitalization continue to be important, as does the ability of financial market participants to provide liquidity and of banks to extend credit. I have confidence in our capital markets and in their resilience, flexibility, and strength. .... Openness to trade and investment helps underpin global growth and has been a source of strength for the U.S. economy. We remain committed to opposing protectionist sentiment wherever it may be found and to advancing greater openness globally. The Doha Development Round is at a critical juncture if negotiations are to be completed by the end of the year. The United States is willing to step forward with the necessary leadership ?however, a significant contribution by the advanced developing countries is critical to Doha's success. Doha's development promise can only be met through agreement to significantly open markets, including financial services markets.