Continued progress in reforms, lower fiscal drag
, and stronger external demand, especially from the Euro area, are expected to support the recovery.
Chang said the government was highly likely to face fiscal drag
in the fourth quarter due to shortfalls in tax revenue and the front loading of the budget in the first half of this year by 58.
Momentum in the US equity market can continue if companies see improved top-line growth as a result of pent-up demand, realization that interest rates will eventually rise, diminished fiscal drag
and more balanced global growth.
| DAVOS, Switzerland, Jan 24 (KUNA) -- The US economy will have a good year in 2014, spurred by strong core growth, rising confidence and an end to the fiscal drag
, Jacob J.
This pickup is partly thanks to a reduction in the fiscal drag
that will result from the recent budget agreement.
"The fiscal drag
in 2013 took 1.5 percentage-points off GDP growth.
"Notably, despite significant fiscal headwinds, the economy has been expanding at a moderate pace, and we expect that growth will pick up somewhat in the coming quarters, helped by highly accommodative monetary policy and waning fiscal drag
The deficit as a fraction of GDP fell from 8.7 percent in fiscal year 2011 to 7.0 percent in fiscal year 2012, for a total of 1.7 percentage points of fiscal drag
. This fiscal drag
partly came from reductions in automatic stabilizers in the budget as the economy recovered, but it mainly came from the wind-down of spending from the Recovery Act.
In the US, the fiscal drag
(which shaved off around 1.75% of GDP in 2013) is due to ease gradually and most analysts expect higher economic growth.
"A recovering housing market and consumer and business spending are driving economic growth, providing some relief from the considerable federal fiscal drag
in the form of mandated sequestration spending cuts and higher payroll taxes than last year that continues to slow both state and national growth.''
The modest improvement of global growth projected for next year is expected to be supported by the maintenance of highly accommodative monetary policies in key advanced economies, by the fiscal stimulus being implemented in Japan, and by the waning of fiscal drag
in the United States and the Euro Area.
First, we'll need a pickup in consumer activity and, second, we'll need a fall-off of intensity of fiscal drag