It looks as if the world’s authorities are all determined to do what it takes, to print as much money as they dare, keep interest rates low for a long time, in a desperate bid to move the world economy forward more quickly.
In 2013 the whole world will be reflating. China and the other emerging economies have served their penance for high inflation, and are now shifting back to a more accommodating policy stance. Meanwhile the Fed, the Bank of England the Bank of Japan are all planning to expand money and credit as much as possible. Inflation fighting takes a back seat.
2013 may be another year when the Euro area muddles through its debt problems, at the expense of poor output figures and continuing unemployment. The US should continue to grow somewhat, whilst Chinese and emerging market growth may pick up a little from the lower rates hit in 2012. The UK too should start to edge forwards next year, as some of the easy money the Bank is creating and injecting will at last get into the real economy. Who knows how long or deep a recession the electors in the most damaged parts of the EU will put up with as a result of the Euro experiment. Falling output will prolong the period of time it takes to get on top of the debts and deficits.
I doubt the UK will accept it needs to cut tax rates to increase the revenue and to stimulate activity, though that would help. I expect the US to come up with a temporary fix for the so called fiscal cliff, but do not expect the fiscal tightening in the USA to remove the modest growth in the US economy. The new Chinese leadership seems to have made a solid start and will doubtless wish to implement the policy of expanding domestic incomes and demand more rapidly, in the face of more limited opportunity to expand exports.
In other words, 2013 will be more of the same. The emerging market countries will grow fastest. The US will be the best of the west. Europe will be a weak performer, held back by stressed banks and by poor state finances, as well as by the Euro scheme. The UK will undertake more monetary experiments, and should meet commentator expectations for some slow growth in 2013.