Efforts to shrink government deficits and debts have been economically painful and have held back short-term growth.
But in 2014, that fiscal drag is expected to ease significantly in the much of the developed world.
Reduced Fiscal Drag in Advanced Economies
Major advanced economies (with the notable exception of Japan) should in 2014 have significantly less fiscal policy drag on growth. Leading the way is the United States, where sequester-mandated budget cuts will decrease and the effects of higher payroll taxes should diminish. The euro zone should also benefit as budgetary austerity fades. Britain should also have a slightly smaller fiscal drag. Overall it’s a rosier picture for global growth in 2014, as economies around the world should benefit from faster growth, especially since demand is improving in advanced economies that make up over 40 per cent of global GDP.
It’s one of the more significant factors that has experts bullish about 2014.
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