International Monetary Fund Cuts US Growth Forecast for 2017-18

President Donald Trump marked six months of his turbulent presidency last week. Several experts predicted a better economic growth for the country under the Republican administration but the economic heft of the United States is already diminishing, according to the International Monetary Fund.

Trump assumed the office January 20, and the IMF too began the year on an optimistic note. The international organization that currently has 189 members predicted Trump’s ascension as the US president would trigger a fiscal stimulus equivalent to 2 percent of gross domestic product in the US, which in turn would boost global growth.

However, the inability of the Trump administration to advance tax and infrastructure reforms has prompted the IMF to downgrade its predictions from 2.3 to 2.1 per cent for 2017, and 2.5 for 2018.

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As he launched IMF's latest quarterly update to World Economic Outlook in Kaula Lumpur Monday, IMF’s Economic Counselor Maurice Obstfeld, said, “From a global growth perspective, the most important downgrade was the United States.”

The IMF report read: "While the markdown in the [U.S.] 2017 forecast reflects in part the weak growth outturn in the first quarter of the year, the major factor behind the growth revision, especially for 2018, is the assumption that fiscal policy will be less expansionary than previously assumed, given the uncertainty about the timing and nature of US fiscal policy changes."

"Market expectations of fiscal stimulus have also receded," it stated.

The IMF prediction comes close on the heels of a Wall Street Journal op-ed by Trump's budget director Mick Mulvaney, published July 12, where he wrote the administration's goal was "sustained 3 per cent economic growth." The program for achieving the economic growth was named "MAGAnomics" by Mulvaney after Trump's campaign slogan, "Make America Great Again.”

The Office for National Statistics will publish its first estimate of GDP figures for the second quarter on Friday, and shed light if the downgrade is justified.

Meanwhile, despite the prediction of world’s biggest economy's sub par economic performance, the forecast for overall global growth remain unchanged for 2017 and 2018 at 3.5 percent and 3.6 percent respectively. “The recovery in global growth that we projected in April is on a firmer footing; there is now no question mark over the world economy’s gain in momentum,” Obstfeld said.

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According to the IMF, better growth in China, the euro zone and Japan will offset the slower-than-expected growth of the U.S. economy. IMF said China is expected to grow 6.7 per cent this year after delivering better-than-predicted second-quarter growth last week. China’s slowdown next year is also expected to be less dramatic as a 6.4 per cent growth has been predicted in the report. Besides, Japan — the world’s third-largest economy — is expected to grow at the rate of 1.3 per cent this year, raising IMF's April prediction by 0.1 percentage points.

In view of the better growth in Germany and France, the IMF said it expected the Euro zone to expand by 1.9 per cent this year.