IMF Forecasts Growth over Two Year Period for the United States Economy

IMF Forecasts Growth over Two Year Period for the United States Economy

The International Monetary Fund (IMF) forecasts that United States economic growth would pick up the pace in 2017 and 2018 and cited Donald Trump’s policies for bringing about the economic boost over the next two years. But the IMF cautioned that these projections could change if the Trump administration pursues protectionist trade proposals that could set off trade wars globally. The IMF projected growth in 2017 for other countries, including China, Germany, Japan and Britain, but cautioned that these projections could change due to rising protectionism or a jump in interest rates.

The IMF noted that the election of Donald Trump has already given a boost to the U.S. stock prices, interest rates and the dollar.  The latest outlook projects the U.S. economy to grow at 2.3 percent in 2017 and 2.5 percent in 2018.  This is an improvement over the lackluster growth in the U.S. economy of 1.6 percent in 2016.

The forecast by the 189-nation global lending agency is lower than projected by President Trump during the campaign, when he promoted a 4 percent growth this year as a result of his policies to cut taxes, reform regulatory policies, and boost infrastructure spending.  The IMF changed its projections from October 2016 and boosted economic projects by 0.1 percent this year and by 0.4 percent in 2018.

IMF Chief Economist Maurice Obstfeld said in a press briefing that he viewed IMF’s latest economic projections as a modest upgrade to the U.S. economy, based on the results of the election. “We now have the presidency and the legislative branch in the same hands.  It seems very clear to us that some of the promises will be delivered on,” Mr. Obstfeld said.  “We know the direction of policies. We don’t know the specifics.” The IMF did not consider Mr. Trump’s threats of imposing higher tariffs on countries such as China and Mexico, because the IMF believes “that countries will realize these are not in their best interests given the threat of retaliation…The outbreak of a trade war would be quite destructive.”

The IMF’s projections for the overall global economy remained unchanged since October 2016, with a forecast for growth at 3.4 percent in 2017 and 3.6 percent in 2018, up from the 3.1 percent growth rate in 2016.

Source: International Monetary Fund World Economic Outlook Update, January 2017

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