World Economy

IMF Downgrades US, Britain Growth Forecast

IMF Downgrades US, Britain Growth ForecastIMF Downgrades US, Britain Growth Forecast

The International Monetary Fund is getting more optimistic about the strength of the global economy. In new forecasts published Tuesday, the organization predicts global growth to be 3.6% this year and 3.7% next year, a small upgrade from previous projections in July. Global GDP growth was 3.2% in 2016.

This growth is unevenly distributed. Among advanced economies, forecasts for US and UK are becoming more subdued. The IMF no longer expects President Donald Trump's proposed tax cuts to happen, causing the international organization to cut its forecast for US economic growth this year and next, news outlets reported.

The US economy will still expand, the IMF predicts, just not as quickly as some had hoped. The IMF forecasts 2.2% growth in 2017 and 2.3% in 2018, a decline from April when the IMF projected 2.3% growth this year and 2.5% in 2018.

“The downward revision relative to April forecasts reflects a major correction in US fiscal policy assumptions,” the IMF wrote in its latest World Economic Outlook report. Because of “significant policy uncertainty”, the IMF economists felt they should not count on congress and the president passing lower taxes.

Even though the IMF cut its forecast for the United States, the international organization still noted that growth is “above trend” and certainly better to last year's 1.5% growth. The IMF encouraged American politicians to use these relatively strong economic times to reduce the debt and spend more on infrastructure and worker education and retraining.

Britain's weaker-than-expected economic performance has resulted in a downgrade earlier this year amid Brexit uncertainty. Figures from the Office for National Statistics showed that Britain’s trade deficit in goods rose by £1.4 billion to £14.2 billion ($18.72 billion) as the country imported more chemicals, machinery and textiles, The Scotsman reported.

The IMF said it expects UK growth to drop to 1.7% in 2017 from 1.8% in 2016, and slow even further in 2018 to 1.5%. The UK was the only major economy that failed to see growth revised higher by the IMF, which cut its 2017 outlook from 2% back in July.

The IMF said the slowdown in growth was driven by a drop in household spending amid the pound’s post-Brexit collapse, which has sent inflation up to 2.9%. “The medium-term growth outlook is highly uncertain and will depend in part on the new economic relationship with the EU and the extent of the increase in barriers to trade, migration, and cross-border financial activity,” the report explained.


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