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IMF: Tax Cuts to Drive Global Growth

January 22, 2018 By Young Research

By Travel mania @ Shutterstock.com

According to the IMF, the world’s GDP will grow faster than earlier projections. Half of the additional growth will be attributable to the tax cut signed by the Trump administration. The IMF wrote:

  • Global economic activity continues to firm up. Global output is estimated to have grown by 3.7 percent in 2017, which is 0.1 percentage point faster than projected in the fall and ½ percentage point higher than in 2016. The pickup in growth has been broad based, with notable upside surprises in Europe and Asia. Global growth forecasts for 2018 and 2019 have been revised upward by 0.2 percentage point to 3.9 percent. The revision reflects increased global growth momentum and the expected impact of the recently approved U.S. tax policy changes.
  • The U.S. tax policy changes are expected to stimulate activity, with the short-term impact in the United States mostly driven by the investment response to the corporate income tax cuts. The effect on U.S. growth is estimated to be positive through 2020, cumulating to 1.2 percent through that year, with a range of uncertainty around this central scenario. 

Bloomberg reports:

About half of the IMF’s global upgrade stems from the Republican tax cuts passed in December and enacted this year. Cuts to the corporate tax rate will give the world’s biggest economy a shot in the arm, lifting U.S. growth to 2.7 percent this year, 0.4 point higher than the fund expected in October, the IMF said Monday in an update to its World Economic Outlook. Projected U.S. growth was the highest among advanced economies.

…

The IMF says the global recovery now under way is the broadest in seven years, with growth picking up last year in 120 countries accounting for three-quarters of world output.

Read more here.

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