According to a recent forecast from the Organisation for Economic Cooperation and Development, president elect Donald Trump’s announced tax cuts and big spending plans are prone to boost the US economy in the next couple of years.
Actually, the OECD talks about a doubling of US economy’s growth rate by 2018, as the organisation is expecting a 2.3% growth in 2017 and 3% in 2018. As far as optimistic assessments go, this one may seem excessive if compared to the 1.5% growth of the US GDP from the current year.
However, Donald Trump said that he will commit to more than half a trillion dollars for rebuilding the country’s crumbling infrastructure and also promised a significant tax cut both for corporations and the middle class. Big corporations are widely regarded as the ones producing most of the well paid jobs, thus a massive tax cut for Big Business may very well translate into a boost for United State’s struggling economy and work force.
According to OECD, provided the campaign rhetoric of the real-estate tycoon materializes into hard facts, the US GDP will return to a moderate growth in 2017 and it will strengthen in 2018 via the announced fiscal stimulus, which is said to be the main driver for boosting the US’s limping economy. The announced fiscal stimulus will kick in particularly in 2018 said the the Organisation for Economic Cooperation and Development in today’s report.
Obviously, if America’s economy does good, the global growth is expected to benefit too from Donald Trump’s tax plans and infrastructure spending in the US. OECD expects for the world’s GDP growth to rise to 3.3% next year and to 3.6% in 2018, while the forecast for the current year is still stuck at 2.9%.
And judging from Ronald Reagan’s saying about the rising tide that lifts all boats, if America replaces socialism (“You didn’t build that!”) with capitalism and goes back to free market principles, the world is prone to benefit as a whole from Donald Trump’s election.
However, we must keep in mind that despite OECD’s optimistic view about the future and the general sentiment in the markets that Donald Trump’s tax cuts and spending increases will make America great again, optimism can’t replace sound policies.
All these potential gains may be lost warned OECD if the Donald pushes ahead with his announced tariff increases over China et al, which may trigger retaliation in the form of a full-scale economic war. And America doesn’t need that, at least not now when the country imports over 2 trillion dollars worth of consumer goods annually.
Source: Financial Times