The IMF chief Christine Lagarde on Sunday voiced optimism for US economic growth under President Donald Trump but warned it could herald trouble for the rest of the world.
“From the little we know, and I will insist on the little we know, because this is really work in progress … but from the little we hear, we have reasons to be optimistic about economic growth in the US,” Lagarde said at the annual World Government Summit in Dubai.
Lagarde predicted tax reform and more investment in infrastructure were both likely under Trump, whose Thursday teaser of fresh tax cut proposals pushed Wall Street stocks to new records.
The Dow, Nasdaq and S&P 500 all closed up 0.6% on Thursday after he promised a “phenomenal” tax cut plan would be unveiled within two or three weeks.
Yet the IMF chief did not mince words in raising concern over the global repercussions of a boon in the US economy.
“Now that’s the good news,” Lagarde said.
“The more worrying news, if you will, is that it will have consequences on the rest of the world and we are seeing it.”
She highlighted the strength of the dollar against other currencies, predicting a hike in interest rates regulated by the US Federal Reserve.
“That’s a tightening that will be difficult on the global economy and for which economies will have to prepare,” said Lagarde.
The IMF in January raised the US growth estimate a 10th of a point for 2017 to 2.3%, and four-tenths of a point to 2.5% for 2018. The World Bank, meanwhile, has not changed its forecasts for the US, citing the uncertainty of Trump’s policy plans.
Both the IMF and the World Bank continue to point to economic uncertainty as a mitigating factor for economic projections in the US.
The two organisations are expected to announce clearer forecasts at the World Economic Outlook in April.
Lagarde, whose organisation has backed taxation in the largely energy-rich and tax-free member countries of the Gulf Co-operation Council, was also unwavering in her support for the impending regional 5% value-added tax.
AFP