IMF raises global growth forecasts, US tax cuts provide boost

Global economies are recovering simultaneously and at a stronger pace, and will get at least a short-term boost from the US tax cuts, the International Monetary Fund said Monday.

In the latest update to the IMF's World Economic Outlook, nearly all the forecasts for 2018 and 2019 were revised upward compared to the October edition.

However, the fund warns that exuberant financial markets could be due for a reversal.

The global economy is now expected to grow 3.9 percent this year and next, two-tenths higher than the previous estimate, and up from 3.7 percent in 2017.

Advanced economies are seeing solid simultaneous growth, and the US tax reform passed just before Christmas will have a measurable effect, at least for a couple of years.

"The revision reflects increased global growth momentum and the expected impact of the recently approved US tax policy changes," the IMF said.

"Some 120 economies, accounting for three quarters of world GDP, have seen a pickup in growth in year-on-year terms in 2017, the broadest synchronized global growth upsurge since 2010."

The WEO upgraded the US GDP forecast by a surprising four-tenths of a point this year to 2.7 percent, compared to the expected 2.3 percent in 2017.

And for 2019, the IMF increased its US growth forecast a whopping 0.6 points from October to 2.5 percent.

The corporate tax cuts are seen driving investment, which could add growth of 1.2 percent to the US economy through 2020, while also contributing to the faster expansion in US trading partners like Mexico

Source: AFP