IMF raises global growth estimate after enactment of tax law

IMF raises global growth estimate after enactment of tax law
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The International Monetary Fund (IMF) on Monday upwardly revised its global growth estimates for 2018 and 2019, in part because of the new tax law President TrumpDonald John TrumpHarris bashes Kavanaugh's 'sham' nomination process, calls for his impeachment after sexual misconduct allegation Celebrating 'Hispanic Heritage Month' in the Age of Trump Let's not play Charlie Brown to Iran's Lucy MORE signed in December.

The IMF is now projecting global output to increase by 3.9 percent in both 2018 and 2019. Those figures are up 0.2 percentage points from the IMF's estimates last October.

The new U.S. tax law lowers the corporate tax rate from 35 percent to 21 percent and also temporarily lets businesses write off the full cost of their capital investments.


"The effects of the package on output in the United States and its trading partners contribute about half of the cumulative revision to global growth over 2018–19," the IMF wrote in its report.

The IMF also increased its projections for U.S. growth. It estimates that growth will be at 2.7 percent in 2018, up 0.4 percentage points from its previous estimate, and forecasts growth of 2.5 percent in 2019, 0.6 percentage points higher than the October forecast.

The IMF said it expects the tax law to stimulate economic activity in the U.S. in the near-term and assumes that lower federal revenue in the short-run due to the tax cuts will not be offset by spending cuts.

However, the IMF said that "in light of the increased fiscal deficit, which will require fiscal adjustment down the road, and the temporary nature of some provisions, growth is expected to be lower than in previous forecasts for a few years from 2022 onward, offsetting some of the earlier growth gains."

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