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Country Risk Service United States 4th Quarter 2012

  • Publication Date:October 2012
  • Publisher:EIU
  • Product Type: Report
  • Pages:17

Country Risk Service United States 4th Quarter 2012

Overview

The legislative process will be held back by the split of congressional chambers between the two parties and high levels of partisanship. After the November elections, Congress will have to address the planned sharp fiscal tightening for 2013. The race is expected to remain in a statistical tie until the election, after the Republican challenger, Mitt Romney, hauled his campaign back into contention with a strong first presidential debate. All the same, we expect the president, Barack Obama, to eke out a narrow win. The outlook for the public finances is for large, but declining, budget deficits over the next two years. The Fed will launch a new open-ended bond-buying programme to boost the economy and improve labour market conditions. It has pledged to keep monetary policy loose even once the recovery picks up. It will also keep interest rates extremely low until mid-2015. The Economist Intelligence Unit forecasts GDP growth of 2.1% in 2012, and an annual average of 2.3% in 2013-17. The euro's debt crisis will weigh on US growth. Inflation is expected to average just over 2% in 2012-17. The US dollar is forecast generally to strengthen against the euro.

Key changes from last month

Political outlook

Opinion polls in the presidential race tightened substantially after Mr Romney's forceful performance in the first presidential debate. This contrasted with a subdued performance by Mr Obama. Before the debate, Mr Obama held a substantial lead, but the contest is now a statistical tie, according to latest opinion polls.

Economic policy outlook

We have slightly modified the path of fiscal deficit reduction for 2013-17, as the deficit for 2012 looks to come in slightly below earlier estimates. We now expect the federal fiscal deficit to fall to 2.6% of GDP by 2017, from 7% in 2012.

Economic forecast

There have been no significant changes to our economic forecast, but it has been extended out to 2017 under our new five-year forecast period.

Please Note: Due to the Nature of This Report The Toc is Not Available

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