Capital Economics Peers Past Fiscal Cliff

Even as the country barrels closer and closer to the fiscal cliff at the end of the year, ""Capital Economics"":http://www.capitaleconomics.com/ is maintaining its projection for modest economic growth in 2013.

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In the firm's latest US Economics Update, economists Paul Ashworth and Paul Dale take a peek into what they believe is America's likely economic future: GDP growth of 2.0 percent in 2013 followed by 2.5 percent the following year.

Of course, there are some major factors that could seriously stifle growth. For one, the economists acknowledge the possibility of a renewed crisis in the [COLUMN_BREAK]

euro-zone creating complications on a global scale. Then, of course, there's the as yet unresolved fiscal cliff drama unfolding in Washington.

Nevertheless, they argue, there is a possibility that GDP growth could go the other way, surpassing most analysts' expectations. For example, ""[i]f the fiscal cliff negotiations are concluded successfully, the removal of that uncertainty could trigger an acceleration in growth, as households and firms start to spend more freely.""

""It is impossible to quantify exactly what impact the uncertainty surrounding the fiscal cliff has had on GDP growth in the second half of this year, but the anecdotal evidence suggests it has been a significant headwind, holding back both business investment and consumption,"" the economists write. ""[I]f a deal is done to avert most of the scheduled fiscal tightening, then one of the major headwinds restraining economic growth in the second half of this year would be removed at a stroke.""

Were that to happen, Capital Economics expects a release of pent-up demand as businesses that originally hesitant to make any big moves suddenly receive a green light to move forward with projects or hire more employees. Consumption growth may also shoot up as households realize their disposable income is safe.