29 01 2018

US Tax Reforms To Boost Global Growth

Tax reform in the US could drive up the global economic growth rate to 3.9 percent, according to new estimates from the International Monetary Fund (IMF).

In its new World Economic Update, the IMF revised its global growth forecasts for 2018 and 2019 upwards by 0.2 percentage point to 3.9 percent, citing increased global growth momentum as well as the expected impact from the recent US tax reforms.

The IMF has also raised the US growth forecast from 2.3 percent to 2.7 percent in 2018, and from 1.9 percent to 2.5 percent in 2019. Overall, the reforms are expected to add 1.2 percent to total US GDP by 2020, it said.

The IMF cited the reduction in corporate tax rates and the temporary allowance for full expensing of equipment as key elements contributing to the improved growth expectations.

The tax reforms and associated fiscal stimulus are also expected to have a positive impact on US trading partners, especially Canada and Mexico, which could see a "favorable demand spillover," it said.

In total, the macroeconomic effects of the US tax policy changes are expected to contribute around half of the total increase in global growth over the next two years.