Wednesday, June 12, 2013

Nouriel Roubini : I do not expect a Recession in the US

Nouriel Roubini : I do not expect a recession in the US. The effect of the fiscal drag on growth is going to be significant. Between raising taxes and cutting spending through sequester, you have a fiscal drag which is probably close to 1.5% of gross domestic product (GDP) and I expect the US economy to grow this year below trend at 1.6% or 1.7%. I do not expect a double-dip recession. The situation is different in Japan. It has several quarters of negative growth, recession and ongoing deflation. What the government is doing right now is restoring ambition to do monetary and fiscal stimulus to stop deflation, jump start the economic growth, weaken yen and boost stock market. The monetary and fiscal easing is necessary. But, on the other side, over time Japan will have to think about doing fiscal consolidation because debt is high and unsustainable. If Japan wants to grow faster, it will have to do structural reforms to liberalize the economy and trade. As long as Japan does all the steps such as monetary and fiscal easing, structural reforms and trade liberalization there is a chance that things will work out. Instead, it Japan does only monetary and fiscal easing and does not focus on structural reforms and trade liberation, the monetary easing effects will fizzle out. - in livemint
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