Tax relief by Trump may boost Global Economy

The World Bank, in its global economic outlook, has admitted that tax cuts along with other spending plans made by Donald Trump may help the United States economy. It will also give a fillip to growth around the globe. The institution added that uncertainty about his trade policies adds to the risks. The US administration led by Trump may squander all economic gains derived from fiscal stimulus if new trade barriers are imposed by the United States. This will lead to retaliation by countries around the world.

Tax cuts

If the US administration under Trump keep its pledge on cutting corporate income tax from its present 35 percent to about 15 percent, then American economic growth will accelerate to 2.5 percent in 2017. In 2018, it will rise by 2.9 percent. Ayhan Kose of Development Prospects Group of the World Bank said that there will be a positive fallout on personal consumption and investment.

It is still too early to examine what impact may happen due to economic policies led by the future Trump administration. The World Bank has left unchanged its forecast for US growth in 2017, at 2.2 percent. The same has been recommended for 2018, at 2.1 percent. Estimates do not include effects of policy instituted by Trump. The World Bank made the projection of the world economy growing by about 2.7 percent this year (2017), a dip of 0.1 percentage point compared to its June forecast. Weak investment and stalling trade, along with heightened uncertainty in policy have subdued economic activity around the world, pushing the growth downwards. The latter is approximately 2.3 percent in 2016. It can be considered slowest rate from the time of the financial crisis. It has been estimated by the World Bank that there will be a pick up in the global growth and will reach 2.9 percent in 2018, a dip of approximately 0.1 percent from the call made in June.

Uncertainty with Brexit

It is forecast by the World Bank that the Euro zone will expand at a rate of 1.5 percent in 2017. Uncertainty continues unabated as the United Kingdom begins negotiations to exit from European Union. This withdrawal will have a negative effect all over the world not only in 2017, but also in 2018. Output in China will expand by 6.5 percent. The Japanese economy is estimated to grow at 0.9 percent in 2017.

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