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El-Erian: 2014 "certain to be better" for U.S. growth

Aaron Task
Daily Ticker

2014 "can be a breakthrough year for America,” President Obama declared Friday.

Yes it can, says PIMCO CEO and co-CIO Mohamed El-Erian. The real question is: “Will it be?”

El-Erian, who is credited with coining the term “new normal”  to describe an economy stuck in a low/no-growth mode, has been more upbeat of late.

2014 is “certain to be better in terms of growth,” he says, predicting U.S. GDP will be in the 2.25%-2.75% range in the coming year. (The Commerce Department Friday reported a revised 4.1% growth rate for the third quarter--the fastest pace in almost two years.)

“That’s pretty good growth performance for an economy that’s been stuck in second gear,” El-Erian says, about his 2014 forecast. “The really good news is if we get a few things out of Washington to give confidence to business to invest...you could have significantly higher growth."

Related: Bull vs. Bear: Rosenberg and Yamarone debate 2014 economy

El-Erian's list of 'few things' includes:

  • A "proper fiscal outlook," so business leaders know what taxes are likely to do over mid-term
  • Investment in public infrastructure, which is "critical to productivity growth"
  • Steps to help improve the labor market, particularly to help the long-term unemployed

President Obama agrees, saying "2014 needs to be a year of action,” at Friday's press conference, adding immigration reform to El-Erian's list of key issues.

Related: Expect "Upside Surprises" for the Economy in 2014: Nariman Behravesh

Unfortunately, at this point it looks like the best we can hope from Washington is the absence of political dysfunction that does damage the economy, he says.

"The good news is we're not going to have the disruption of a tech default," El-Erian says, eyeing the looming debt ceiling debate. "But we're not going have the tailwinds this economy needs."

Related: PIMCO’s El-Erian to Congress: Stop Creating Economic Headwinds

In other words, the "breakthrough" is likely to be elusive.

So what is El-Erian's outlook for Fed policy and interest rates in 2014? Watch the accompanying video to find out. 

Aaron Task is the host of The Daily Ticker and Editor-in-Chief of Yahoo Finance. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com

 

 

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