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IMF: U.S. Economic Growth Expected to Rise Due to Trump Policies

Economic growth expected to increase to 2.3% in 2017, 2.5% in 2018

Donald Trump
AP
January 16, 2017

President-elect Donald Trump's economy policies are expected to increase economic growth in the United States over the next two years due, according to a report from the International Monetary Fund.

The Fund's economic outlook projects that Trump's proposed fiscal stimulus will push economic growth to 2.3 percent in 2017 and 2.5 percent in 2018 after lackluster growth of 1.6 percent in 2016.

Expected growth in the United States over the next two years aligns with growth in the economy following the Nov. 8 presidential election, when equity prices rose and the dollar appreciated in value.

"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 defense spending," said Maurice Obstfeld, chief economist at the International Monetary Fund.

Projected economic growth in the United States will likely spill over to other economies as well. Advanced economies are projected to grow 1.9 percent in 2017 and 2.0 percent in 2018.

"This forecast is based on the assumption of a changing policy mix under a new administration in the United States and its global spillovers," the report states. "The outlook for advanced economies has improved for 2017-18, reflecting somewhat stronger activity in the second half of 2016 as well as a projected fiscal stimulus in the United States."

Global growth is projected to increase from 3.1 percent in 2016 to 3.4 percent in 2017 and 3.6 percent in 2018. The report noted that global growth could increase more if fiscal stimulus implemented is larger than expected in the United States or China.

Trump has vowed to cut the corporate tax rate from its current level of 35 percent to 15 percent, with the intention of bringing back jobs to the United States. His tax proposal would reduce the number of individual tax brackets from seven to three and lower taxes for all Americans. The president-elect also has said he would roll back red tape on businesses.

"In light of the U.S. economy's momentum coming into 2017, and the likely shift in policy mix, we have moderately raised our two-year projections for U.S. growth," Obstfeld said. "At this early stage, however, the specifics of future fiscal legislation remain unclear, as do the degree of net increase in government spending and the resulting impacts on aggregate demand, potential output, the Federal deficit, and the dollar."

Published under: Donald Trump , Economy