, of course, several downside risks to the central bank ’ s outlook for 2013. the most obvious is a pronounced deterioration in the global environment, which could constrain our exports and weaken economic confidence, pushing the economy back to scenarios which prevailed during 2009. the first major setback to the global recovery relates to policy uncertainty surrounding resolution of the sovereign debt crisis in the euro area. failure of european policymakers to deliver on their commitments to deeper fiscal and financial integration would not only worsen fears about a black swan scenario in which greece exits the euro zone, but also set in motion destabilizing forces in which persistent fiscal and debt problems spread virulently from euro area periphery to the core. another setback revolves around the ability of president obama and the republican controlled congress to resist the temptation for political brinksmanship and to agree on a budget plan that avoids the looming “ fiscal cliff ”. if expiring tax provisions and expenditure cuts come into play, growth in the united states could fall to zero or contract. moreover, u. s. public debt is rapidly approaching its statutory limit which, if not resolved, would curtail the options available to the u. s. treasury to stave off a debt default. a second downside risk is the deterioration in the industrial relations climate. prolonged industrial action similar to that experienced at the tcl plant could setback the incipient growth trend in the non - energy sector. bis central bankers ’ speeches finally, bottlenecks in project implementation ( for example, failure to settle contractor payment of arrears or to agree on which projects are suited to the p3 model ) also represent a serious downside risk to the envisaged growth outlook. the recovery in 2013 depends heavily on a strong fiscal impulse. conclusion i would like to conclude with some brief thoughts on the economic policy challenges for the medium term. the first is on fiscal sustainability. as we are all aware, the fiscal programme for 2012 / 2013 is being implemented against the backdrop of unsettled economic conditions globally and several years of negative or negligible domestic growth. in this context, the bank supports the government ’ s approach to maintaining a fiscal stimulus via temporary deficits over the next few years. at the same time, we firmly believe that it is important for the government to respect its own plan for moving to fiscal balance over the medium term. indeed, these plans should be accelerated once conditions permit, in order to avoid a further build - up

the advanced economies, the u. s. economy continued its moderate pace of recovery, with gdp growing at an annualized rate of 2 per cent in the third quarter of 2012. although more recent economic indicators have been stronger - than - expected, such as the pick - up in household consumption and the housing market, u. s. employment is still more than 3 per cent below its pre - crisis peak. industrial production has partly recovered but it is too early to fully gauge the extent to which hurricane sandy in late october has affected activity. bis central bankers ’ speeches across the atlantic, the situation remains volatile. indicators of activity and confidence in the euro area continue to deteriorate, despite recent improvement in financial market sentiment. economic conditions remain weakest in greece, italy, portugal and spain given persistent difficulties in the balance sheets of banks and governments in these countries. even the stronger economies of the euro zone are showing signs of deterioration. the french economy has hardly grown since march 2011, and growth in germany is slowing further. major emerging market economies such as china, india and brazil are experiencing noticeably lower growth rates in 2012 partly due to contagion effects from the european crisis and slower economic growth in the united states. policy actions by major central banks have supported an improvement in global financial market sentiment since the middle of 2012. unconventional monetary measures have been at the heart of the policy response in advanced economies, while central banks in emerging markets and developing countries have either cut policy rates or postponed interest rate hikes. conditions in euro area sovereign debt markets improved markedly following announcements in late july 2012 by the european central bank about its willingness to take decisive actions to preserve the euro, and improved further after confirmation of its willingness to purchase shorter term sovereign bonds in secondary markets through the outright monetary transaction ( omt ) program. in the united states, the federal reserve announced additional measures in september 2012 to ease monetary policy by expanding its asset purchases until a substantial improvement in the labor market is seen, and emphasized that its exceptionally low level of federal funds rates are likely to be in place until mid - 2015. the picture, ladies and gentlemen, is one where policymakers in our major export markets of the united states and europe are battling weak growth, stubbornly high unemployment, widening fiscal deficits and burgeoning public debt. and what about the caribbean, which accounts for a substantial share of our exports? while the caribbean region as a whole appears to be gradually recovering from the deep recession caused by the global economic crisis