Global economy to continue "divergent" performance in 2013: IIF (2)

DIVERGENCE IN 2013

"Looking ahead to next year, the themes of global economy would continue to be divergence and an ongoing shift of economic and financial power from developed countries to developing countries," noted Suttle. "The big problem persisting next year is Europe, as the eurozone malaise would continue into the next two or three years and become the drag on global economic recovery."

Some of that is inevitable, Suttle reckoned, as Europeans have chosen a course that is a tough one to follow, referring to the ongoing fiscal austerity steps taken in many eurozone countries.

Greece has a long way to recover before returning to anything like normal economic conditions, which presents major economic and social challenges, Suttle stressed.

Some mature economies, the United States in particular, however, could fare better next year, boosted by the third round of quantitative easing (QE3) from the U.S. Federal Reserve and lifting of some uncertainties, including the "fiscal cliff" -- the expiring tax cuts and sweeping spending reductions by the end of the year -- weighing on U.S. economic recovery, he predicted.

"We are assuming the White House and U.S. Congress could reach some degree of agreement to solve the fiscal cliff, which might be the first step in a long process towards a coherent fiscal policy, " said Suttle.

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