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International economies likely to boost performance in 2013

The global economy in 2013 would be better than 2012 despite the challenges in the United States and the “mess” in Europe, said an economist.

“This year, will grow faster than 2012. We expect 2.8-percent global growth this year versus 2.2 percent achieved last year,” Standard Chartered Bank global head of macro research Marios Maratheftis told participants at a briefing.

He opined that growth in the United States is set to pick up in the second half of the year, as the tightening effects of the fiscal cliff and debt ceiling would be felt most acutely during the first six months.

“Things would have been much worse without an agreement on the fiscal cliff, but even with the agreement, we are not getting what we need for the U.S. economy.

“It is simply less bad than it would have been without the agreement,” he said.

He added: “It is time for new ideas. Historically, policymakers relied on interest rates to manage growth and inflation, with a rate hike used to curb overheating and easing to spur growth.”

“This time around, it is not enough,” Maratheftis said, asserting that the Federal Reserve has done everything at its disposal to promote growth.

“Now, it has to come from the Government. If quantitative easing and monetary easing are inadequate, then the Government must increase its spending.

“Is that going to happen? No, because the fiscal cliff agreement involves fiscal tightening, which means the U.S. government will be spending less this year than 2012.”

Maratheftis noted that although the bank remained positive about the United States, the world's largest economy had yet to grow sufficiently to compensate for the jobs lost during the 2008-2009 recession.

“The second half will be an improvement over the first half, though growth will be unexciting, given the lack of stimulus measures,” he said.

On the risk of capital outflows back to the United States, Maratheftis explained that the repatriation of funds was more common in bad times than good.

“However, manufacturing in Asia could experience rebalancing, as the region becomes more expensive,” he said.

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