The International Monetary Fund (IMF) adjusted its forecast for world economic growth in both 2018 and 2019 up to 3.9 percent (an uptick of 0.2 percentage points from its last forecast), crediting the expected impact of the U.S. Tax Cuts and Jobs Act. In addition, it predicts real GDP in the U.S. will be 1.2 percent higher by 2022 than it would have been without tax reform. It also predicts 2.7 percent annual growth in the U.S. in 2018 (up from 2.3 percent).
“The U.S. tax policy changes are expected to stimulate activity, with the short-term impact in the United States mostly driven by the investment response to the corporate income tax cuts,” the IMF said in a report summary.
While the IMF estimates that the tax cuts will spur growth until 2022, it stressed that this would change if the individual cuts and other elements of the law set to expire were allowed to do so. As it stands now, the IMF predicts global growth will be lower than had been forecasted beginning in 2022 and for a few years onward.
For now, the news is positive: It points to the fact that corporate and individual tax cuts are predicted to drive global growth and gives Congress a good reason to lock in the cuts.