International Monetary Fund boosts growth forecast for US, cites Donald Trump impact

The International Monetary Fund is raising its forecast for the US economy this year and in 2018, reflecting an expected boost from the economic policies of President-elect Donald Trump. The IMF also increased 2017 growth projections for a number of other countries including China, Germany, Japan and Britain, but warned that the global economy faced a number of downside risks including rising protectionist trade pressures.

The 189-nation global lending agency’s latest economic outlook, released today, took note of the significant impact Trump’s election has already had in giving a 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.

During the campaign, Trump said his economic policies of tax cuts, regulatory reform and boosts in infrastructure spending would lift US growth to annual rates of 4 per cent. The new forecast represented a boost of 0.1 percentage point for 2017 compared to the IMF’s last forecast released in October and an even bigger boost of 0.4 percentage point for 2018, reflecting an expectation that Trump’s program will take time to be implemented.

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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 crisis.

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But the IMF saw better prospects in a number of countries, thanks in part to a rebound in growth in many parts of the world in the second half of last year that provided more momentum going into 2017.

“The global economic landscape started to shift in the second half of 2016,” IMF chief economist Maurice Obstfeld said, helped by a rebound in manufacturing activity in many countries and the financial market rally that started with Trump’s November election victory. “Markets have noted that the White House and Congress are in the hands of the same party for the first time in six years and that change points to lower tax rates and possibly higher infrastructure and tax spending,” Obstfeld said