The IMF is predicting an uptick in global growth in coming years, in part due to the impact of US tax cuts spurring investment and spending, the organization announced Monday.
Global GDP growth will rise to 3.9% in 2018 and stay at that level in 2019 according to the figures released in the latest update to the World Economic Outlook report.
“Well 2018 is really starting on a high note. We see momentum across the advanced economies and in Asia, and we are able to upgrade our growth forecast for this year and next by a full point-two percentage points to 3.9 percent. Even our 2017 forecast is upgraded by point-one to 3.7 percent,” said IMF Research Department Director Maury Obstfeld.
Cuts to the US corporate tax rate should stimulate investment and consumer spending for several years. But the IMF warns that the temporary nature of some of the cuts paired with a surge in the US government spending deficit could eventually negatively impact growth.
More broadly, after sustained and strong growth in markets, and with many central banks pulling back and raising rates there is a risk of a correction.
“Well, as always there are risks, particularly after a long period of low interest rates. There have been increases in debt by households, by corporates, by governments which may leave them exposed once monetary policy normalizes and interest rates rise,” said Obstfeld.
Economic good times should not lull countries leaders in to complacency, he warned.
“Now is a golden opportunity for reforms. Policymakers need to be asking themselves how can they raise output in the long-run, how can they build resilience, and how can they build up buffers so they can act if… and when… the next downturn comes which it surely will,” said Obstfeld.