Refuting concerns of the negative implications of Trump policies on the global economy, the U.S. Treasury Secretary, Steven Mnuchin said, the US economy would be well positioned for growth under the Trump administration.
During a conversation with the IMF Managing Director, Christine Lagarde, on the US economy, last week in Washington, Mnuchin said, the U.S. economy, U.S. business and the U.S. consumer is delivered. I think there is a lot of liquidity and we are well-positioned for growth.
“We are poised, but we are in a geopolitical world, some type of event could happen, but I think we are positioned well,” Mnuchin said.
However, the IMF chief said if the US economy is to grow it needs more investments. Lagarde told Mnuchin that there has been a significant drop in investments to the US economy.
Responding to Lagarde, Mnuchin said, unlike in the past where the environment in the US was not business friendly the administration under Trump has reached out to many businesses.
“President Trump, during his first 100 days in office has reached out to a lot of businessmen, big and small, entrepreneurs, technological experts and manufacturers. There are lots of good ideas out there and it’s our job to unlock the best ideas and make them work,” Mnuchin said.
The US economy according to the US Treasury Secretary is expected to grow up by three percent next year.
“The conditions which prevented growth are going to be changed. This administration is listening,” Mnuchin said.
Speaking on taxes the US Treasury Secretary said, the US tax code is not competitive for US businesses.
“High tax rates. Worldwide income deferral. It is not a surprise we have trillions of dollars that have been left offshore,” he said.
World attention has been on the inward looking and protectionists policies under the Trump administration. Economists said protectionist measures would have major spillovers on less developed countries which depend on trade with US.
IMF Economics Counsellor and Director of the Research Department, Maurice Obstfeld said, at the launch of the Global Outlook, the Fund will monitor the policies of US administration under President Trump and come up with a review of the global economy by around July this year.
The IMF raised its global growth forecast to 3.5 percent this year, up from 3.1 percent last year and 3.6 percent in2018. The Fund said, acceleration will be broad based across advanced, emerging, and low income economies, building on gains we have seen in both manufacture and trade.
“Our new projection for 2017 is marginally higher than what we expected in our last update. This improvement comes primarily from good economic news for Europe and Asia, and within Asia, notably for China and Japan,” Obstfeld said.
However, despite these signs of strength the IMF said, many other countries will continue to struggle this year with growth rates significantly below past readings. Commodity prices have firmed since early 2016, but at low levels, and many commodity exporters remain challenged – notably in the Middle East, Africa, and Latin America.
It also noted that at the same time a combination of adverse weather conditions and civil unrest threaten several low-income countries with mass starvation.
In Sub-Saharan Africa, income growth could fall slightly short of population growth, but not by nearly as much as last year.
“Whether the current momentum will be sustained remains a question mark.
There are clearly upside possibilities. Consumer and business confidence in advanced economies could rise further – though confidence indicators are already at relatively elevated levels. On the other hand, the world economy still faces headwinds,” Obstfeld said.
He said, productivity growth remains subdued across the world economy, for complex reasons that we have explored in a recent paper, and that seems likely to persist for some time. In addition, several prominent downside risks threaten our baseline forecast. One set of uncertainties stems from macroeconomic policies in the two largest economies.
In its regional outlook the IMF ranked Asia as the fastest growing region spurred by India, China and Japan. The Indian economy is poised to record a growth of over 7 percent this year and in the next.
IMF Director of Asia and Pacific Department, Changyong Rhee at the launch of the Asia Pacific Region Outlook said, the outlook for the region remained quite robust.
“Actually, it’s the strongest in the world, and some data points to a pick-up in growth momentum in Asia,” Rhee said. He said, there are certain upside risks, upside potential to near-term growth such as the broad-based cyclical recovery, particularly, in advanced economies such as the United States, and in large emerging economies in Asia such as China.
However, Rhee noted that the outlook for the region is crowded with significant downside risks such as geopolitical tension, inward-looking trade policies, and rapid financial market tightening.
“Over the medium term, Asia also faces some challenges including aging population and slowing productivity growth,” he said.
Growth for the region is to accelerate to 5.5 percent in 2017, and 5.4 percent in 2018, slightly over 5.3 percent growth in 2016.
However, the high credit growth in China has been some concern for its policy makers who expect it to reduce soon to avert spillovers to the region.
Credit in relation to China’s economy has more than doubled in less than a decade to over 200 percent according to the IMF’s Global Financial Stability Report .
The IMF expects some improvement in the Sri Lankan economy this year with growth to be over 4.5 percent up from 4.4 forecast for 2016.
IMF Mission Chief for Sri Lanka Jaewoo Lee said, there is all possibility that Sri Lanka’s economy could grow beyond 4.5 percent this year which is the current projection for 2017.
‘We expect the economy to strengthen this year relative to 2016 which was a challenging year due to the floods in the first half followed by drought in the second,” Lee said.