US can muddle through 2% growth rate: Expert

In an interview to CNBC-TV18, Nariman Behravesh of IHS talks about growth in US, China and European countries. According to him, there may be negative growth in Q2-Q3 and possibly into the Q4. "US on the other hand probably can muddle through at about a 2% growth rate, not terribly good but not awful either," he adds. He warns that growth in China is worrisome.

Here is an edited transcript of his comments. Also watch the accompanying video. Q: What is your outlook for growth for the second half of this year? I know it is difficult to generalise around the world but it seems to me that all countries seem to be pointing downwards, China seems to get frantic about its slowing growth.  I know in India we share that bearishness? I am not sure what your outlook on the US is but I think across the board all economists don’t expect any kind of growth and mostly expect a recessionary phase to continue in the eurozone.
A: Let’s start with the eurozone. Certainly we think the recession will probably get worse before it gets better. So, we are looking at negative growth in Q2-Q3 and possibly into the Q4. US on the other hand probably can muddle through at about a 2% growth rate, not terribly good but not awful either.
China is a worry but on the other hand it looks like the government is moving much more aggressively now than it have been until recently, two interest rate cuts in a month and probably more infrastructure spending. So our view is in the second half of the year we will actually see China reaccelerate a little bit. So on those two scores, US, China, the news isn’t bad. Europe on the other hand it’s almost unrelentingly bad. Q: Rate cuts and bond purchase program, extensions and all of this seems to have failed to boost the markets at least. But if I was to leave the markets aside do you think they are going to have the required or desired impact on the underlying economies themselves. Are they going to help push fundamental change and may be we can't see it in the markets today but may be we will see it few weeks or few months down the line?
A: I think the best we can say about the actions by the central banks especially we are talking about the Fed, the European Central Bank (ECB) and so forth, is that they are providing like an insurance policy to prevent things from getting worse. They will not help the healing process after financial crisis. They can't deal with the sovereign debt problems in the US and Europe. So, there is only so much that the central banks can do but one thing they can do is in effect provide some kind of insurance against things getting far worse.