Published: Mon, January 22, 2018
Money | By Armando Alvarado

US Tax Overhaul Will Accelerate Global Growth, IMF Says

US Tax Overhaul Will Accelerate Global Growth, IMF Says

Mr Obstfeld said: "As the year 2018 begins, the world economy is gathering speed".

"Emerging and developing Asia will grow at around 6.5 percent over 2018-19, broadly the same pace as in 2017". But China's growth is forecast to slow to 6.6 percent this year and 6.4 percent in 2019.

The euro area also will see growth accelerating, improving in almost all member states, especially Germany, which saw its GDP forecasts upgraded by a half point this year and next to 2.3 percent and 2.0 percent, respectively.

Trump is expected to speak Friday at the World Economic Forum's annual meeting in Davos, Switzerland - the first US president to do so since Bill Clinton in 2000.

The body also said recently-implemented U.S. tax cuts would stimulate growth, adding 1.2% to the world's biggest economy by 2020 - though due to the temporary nature of the some of the policies it would lower growth from 2022 onwards. The forecast also projected that federal tax revenues will fall more than spending, increasing deficits and acting as a fiscal stimulus that will boost US growth.

The IMF had originally forecast just 2.3 percent growth for America but lifted its projection significantly after Republicans in late December passed the largest overhaul of the US tax code in over 30 years. Now those figures have been revised up to 2.7 percent in 2018 and 2.5 percent in 2019. "Consistent with these plans, the country's ongoing and necessary rebalancing process implies lower future growth", Obstfeld said at a news conference in Davos. The region continues to account for over half of world growth.

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"Our view is that the current upturn, however welcome, is unlikely to become a "new normal" and faces medium-term downside hazards that likely will grow over time", said Maurice Obstfeld, the IMF's chief economist. Mexico's economy will be 0.4 points stronger this year and 0.7 points stronger in 2019.

The stronger outlook was attributed to the stronger momentum in domestic demand and higher external demand. Among advanced economies, growth in the third quarter of 2017 was higher than projected in the fall, notably in Germany, Japan, Korea, and the United States.

Despite the global GDP growth, she said, one must be cautious as many of those problems that led to the recent recession, remain. If global sentiment remains strong and inflation muted, then financial conditions could remain loose into the medium term, leading to a buildup of financial vulnerabilities in advanced and emerging market economies alike.

But the Fund also said Italy's March general election posed a risk to structural reforms. These have risen by about 20 percent between August 2017 and mid-December 2017, to over $60 per barrel, with some further increase as of early January 2018.

India was the fastest growing country among emerging economies in 2016.

However, survey reports have also pointed to a boost to Britain's manufacturing sector as the weakness of the pound, combined with the strength of the global economy, lifts exports.

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