The U.S. economy grew modestly during the first quarter of the year but is expected to gain steam as the year moves forward, Deputy U.S. Treasury Secretary Robert Kimmitt said Saturday.
Kimmitt attended the two-day meeting of the Group of Eight's financial officials at a lake resort just outside Berlin after Treasury Secretary Henry Paulson decided to stay in Washington to focus on upcoming talks with China next week.
He said U.S. economic growth was on track and similar to that of global growth.
"I informed my colleagues that our fiscal deficit continues to decline and the U.S. economy is making the transition to a sustainable growth path," Kimmitt said. "While the economy grew modestly in the first quarter, we are confident it will return toward trend over the year. We see evidence that housing is stabilizing and that rising delinquencies in the subprime mortgage market have not spread more generally. Inflation remains contained and the job market is strong."
Kimmitt said that foreign firms in the U.S. employ more than 5 million workers and account for almost 6% of gross domestic product.
"At the same time, rising protectionist sentiment -- both at home and abroad -- in the fields of trade and investment is worrisome," he said. "With the accumulation of large financial resources in many governmental coffers around the world, some of which are in turn being recycled into (foreign direct investment) abroad, protectionist pressures could become more acute."
Kimmitt welcomed the G-8's adoption of an action plan to help developing countries, particularly those in Africa, to ensure future debt sustainability and deepen their domestic bond markets.
In the wake of extensive debt relief granted by the G-8 and multilateral lenders, he warned against the rapid buildup of fresh debt in Africa, and stressed that lenders should behave responsibly.
"Official lending activities throughout the world, particularly in Africa, threaten the hard-won gains from recent debt relief initiatives," he said. "It is critical that both borrowers and creditors agree on an approach to debt sustainability that prevents the reemergence of debt distress."