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Wednesday 12 December 2018

IMF: Trump tax reform to boost global growth while Britain left in the slow lane

The IMF upgraded its forecasts for the world economy by 0.2% to 3.9% for 2018 and 2019 in its latest World Economic Outlook.

Trump's tax reforms will boost the US, while Theresa May's Brexit will hurt the UK, the IMF said (PA)
Trump's tax reforms will boost the US, while Theresa May's Brexit will hurt the UK, the IMF said (PA)

By Ravender Sembhy, Press Association City Editor

The International Monetary Fund expects Donald Trump’s tax reforms and strong growth in Europe to spur the global economy in 2018, while Britain’s prospects for the year it quits the EU have been downgraded.

In its latest World Economic Outlook, the IMF upgraded its forecasts for the world economy by 0.2% to 3.9% for 2018 and 2019.

“The revision reflects increased global growth momentum and the expected impact of the recently approved US tax policy changes.

“The US tax policy changes are expected to stimulate activity, with the short-term impact in the United States mostly driven by the investment response to the corporate income tax cuts,” the IMF said.

The IMF expects US growth to accelerate to 2.7% this year, from 2.3% in 2017, citing increased investment as businesses take advantage of lower corporate tax rates.

Mr Trump signed a $1.5 trillion (£1.1 trillion) tax overhaul into law late in 2017, cutting tax rates for businesses and also offering temporary cuts for some individuals and families.

It includes slashing corporation tax in the US from 35% to 21%.

Global growth will also be underpinned by “upside growth surprises” in Asia and Europe, the IMF added.

But the UK’s growth outlook has been slashed from 1.6% to 1.5% for 2019, the year it quits the European Union.

For 2018, the IMF is forecasting UK growth at 1.5%, but prospects for Germany, France, Italy and Japan were all upgraded.

The 19-country eurozone saw growth last year of 2.4%, the best since the financial crisis, and will bounce 2.2% in 2018, the IMF said.

The organisation has previously said that Brexit uncertainty and the inflationary squeeze on household spending power will put the brakes on the UK economy.

The Washington DC-based group said firms are likely to continue deferring investment decisions until there is greater clarity on the UK’s future trading relationship with the European Union.

Press Association

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