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BUSINESS GUARDIAN guardian.co.tt JANUARY 19 • 2017
IMF predicts faster growth
for US, citing Trump impact
The International Monetary
Fund on Monday raised its
forecast for the US economy
over the next two years, say-
ing president-elect Donald
Trump's policies would boost
economic growth. But officials warned that if
Trump's protectionist trade proposals set off
a trade war, that could be "quite destructive"
for the global economy.
The IMF also increased 2017 growth projec-
tions for a number of other countries including
China, Germany, Japan and Britain, but warned
that the global economy faced a number of
downside risks from rising protectionism to
a jump in interest rates.
The forecast, which is part of the 189-na-
tion lending agency's Global Economic Out-
look Update, noted that Trump's election has
already given a significant boost to US stock
prices, interest rates and the dollar.
The new outlook puts US economic growth
at 2.3 per cent this year and 2.5 per cent in 2018.
That would be an improvement from lackluster
US growth around 1.6 per cent in 2016, ac-
cording to IMF estimates.
The new forecast represents a boost of 0.1
percentage point this year and an increase of
0.4 percentage point for 2018, when Trump's
stimulus plans would be expected to take ef-
fect. That is a half-point higher growth than
the IMF was forecasting in October, before
During the campaign, Trump said his eco-
nomic policies of tax cuts, regulatory reform
and boosts in infrastructure spending would
lift US growth to annual rates of four per cent.
However, the World Bank last week left its
US forecast unchanged at 2.2 per cent growth
in 2017 and 2.1 per cent for 2018, arguing that
there was too much uncertainty over the fate
of Trump's proposals to incorporate them in
IMF chief economist Maurice Obstfeld told
reporters at a briefing Monday that the IMF's
upgrade for the United States was a moderate
increase that took into account the US election
"We now have the presidency and the leg-
islative branch in the same hands. It seems
very clear to us that some of the promises will
be delivered on," Obstfeld said. "We know the
direction of policies. We don't know the spe-
He said that the IMF had chosen not to in-
corporate Trump's threats of imposing higher
tariffs on countries such as China and Mexico
if their trade policies do not change because he
believed "that at the end of the day, countries
will realise these are not in their best interests
given the threat of retaliation. ... The outbreak
of a trade war would be quite destructive."
For the overall global economy, the IMF left
its projections unchanged growth of 3.4 per
cent for this year and 3.6 per cent for 2018,
both up from 3.1 per cent growth in 2016, a
year when global growth slowed to its weakest
performance since the 2008-2009 financial
But the IMF saw better prospects in a number
of countries including Germany, Japan, Spain
and Britain, thanks in part to a rebound in
growth in many parts of the world in the second
half of last year that gave momentum going into
2017. Still, Obstfeld said there was a wider than
usual range of upside and downside risks, in
part because of the uncertainty over how much
of Trump's programme will win congressional
approval and what the spillover effects will be
for the rest of the world.
While Trump's election victory boosted eco-
nomic prospects in the United States, the im-
pact has been uneven for the rest of the world.
Some countries could see stronger growth from
the increase in activity in the United States, the
world's largest economy, but some emerging
market countries may face challenges as global
interest rates rise.
The new outlook boosted the growth forecast
for China, the world's second largest economy,
by 0.3 percentage point to 6.5 per cent this year.
The IMF expects the Chinese government to
providing further stimulus to the economy.
The outlook also boosted 2017 growth
projections for Germany, Japan, Spain and
Britain to reflect stronger-than-expected
performance in the second half of last year.
At the same time, the IMF lowered its fore-
casts for Italy, South Korea, India and Brazil,
reflecting disappointing performances in the
last half of 2016.
The IMF said that growth prospects in Latin
America were being hurt by rising uncertainty
about the outlook in Mexico, given Trump's
statements overhauling trade relations be-
tween the United States and Mexico.
The IMF slashed its growth projections for
Mexico by 0.6 percentage point in both 2017
and 2018 to 1.7 per cent this year and 2.0 per
cent next year.
See stories on Pages 22 & 23
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