Rock-bottom interest rates mean that, economically, there is theoretically space for more expansionary fiscal policy.

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Mr Mantega now accepts that expansionary fiscal policy has helped drive up interest rates and the currency, something he previously denied.

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In the third quarter of 2009, the economy began to recover, in large part due to export growth, low interest rates, and an expansionary fiscal policy, and growth was 3.6% in 2011.

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And expansionary fiscal policy allowed Argentina to grow 63% over the six years following the default and raise 11 million, out of a total population of 39 million, out of poverty, explained Weisbrot.

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Our baseline outlook is for a moderately expansionary fiscal policy (media reports are that the fiscal deficit target is likely to be CNY1.2trn, or 2.2 percent GDP in 2013, up from CNY800bn and 1.5 percent GDP in 2012), a neutral monetary stance (media reported 13.5 percent M2 growth target for 2013, compared with 14 percent in 2012) and gradual reforms.

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Its strong fiscal position, receding inflation and expansionary policy measures should ensure a soft economic landing, but it needs to expedite its effort to diversify the source of growth and strengthen structural reforms for inclusive growth.

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Mr Tuchtfeld calculates that fiscal policy will be neutral or even slightly expansionary in 2012.

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