President-elect Donald Trump’s big-spending plan and tax cuts are expected to help double the US economic growth rate by 2018, the OECD said Monday.
The US economy will grow by 2.3 percent in 2017 and 3.0 percent in 2018, said the Organisation for Economic Cooperation and Development, revising its earlier forecast. That compares to gross domestic product growth of 1.5 percent this year, according to the OECD.
The Republican property tycoon’s team has said he will devote 550 billion to rebuilding decrepit infrastructure. The incoming president also campaigned on promises for major corporate tax cuts as part of a wide-ranging blueprint for the limping US economy.
“GDP is projected to return to a moderate growth trajectory in 2017 and strengthen in 2018, mainly due to the projected fiscal stimulus, which takes effect particularly in 2018,” the OECD said in its report.
“Indeed, projected fiscal support will boost GDP growth by just under 0.5 and 1 percentage point in 2017 and 2018 respectively,” it added.
Global growth will also benefit if the US president-elect’s avowed spending and tax plans boost domestic investment and consumption, the Paris-based body said.
It now sees world GDP growth rising to 3.3 percent next year and 3.6 percent in 2018 but stuck to its 2016 forecast of 2.9 percent.
For Britain, the OECD said it was less pessimistic than it was in September when it halved its 2017 growth forecast in the wake of British voters opting to leave the European Union.
It revised up its forecast for this year to 2.0 percent and to 1.2 percent for 2017.
“The unpredictability of the exit process from the European Union is a major downside risk for the economy,” the report said.
The OECD also suggested that fiscal initiatives could be the answer for other governments to help drive the global economy after a “low-growth trap” for the last five years.
“Durable exit from the low-growth trap depends on policy choices beyond those of the monetary authorities — that is, of fiscal and structural, including trade policies — as well as on concerted and effective implementation,” OECD chief economist Catherine Mann said in the report.