Considerable uncertainty over policies initiated by Trump Admin: IMF

The IMF is “closely” following the implications of some of the major policy changes initiated by the Trump administration that has resulted in “considerable uncertainty,” said a top IMF official. 

“Our latest World Economic Outlook assumes fiscal expansion by the US will carry momentum forward, raising US economic growth from 2.3 to 2.5 per cent in 2018, which is positive for the global economy,” Tao Zhang, Deputy Managing Director of the International Monetary Fund, told PTI in an interview.

“At the same time, there is considerable uncertainty on specific policies. We are following policy developments closely, and we need to see details of the various proposals to better understand their implications,” the top IMF official said when asked about the economic policies of the US President Donald Trump.

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In recent weeks, Trump has decided not to label China a currency manipulator and said he would cut a favourable trade deal with Beijing if it agreed to help him with North Korea.  The administration has also indicated that it will not seek sweeping changes to the North American Free Trade Agreement, which the president called the “worst trade deal”.

Immigration was the centerpiece of his campaign. Trump signed an executive order on January 27 barring people from the seven countries from entering the United States for 90 days.

The order was blocked by federal courts and the Trump administration replaced it with a revised, narrower travel ban effective March 16 which dropped Iraq from the list. Courts have also halted parts of the second order.

Meanwhile, Zhang said although the global growth is picking up, the world economy still faces many challenges, and risks remain skewed to the downside.

“These risks include an inward shift in policies and elevated policy uncertainty; an aggressive rollback of financial regulation; and a faster-than-expected tightening of financial conditions.

These are risks, not yet certain. We have to see whether they come to pass,” he said.

“As our Managing Director Christine Lagarde said during the Spring Meetings, we are seeing the global economy picking up momentum,” he added.

“Despite some improvement for the US and other advanced economies, most of the global pick-up stems from emerging markets, including India.

“The outlook for the Asia Pacific region remains robust?  the strongest in the world?and recent data point to a pickup in momentum,” he said.

Responding to a question, Zhang said the IMF is now starting to discuss next phase of quota reforms.

Finance Minister Arun Jaitley had articulated about it in his address to the IMF last week.

“There is a general recognition by the Fund’s membership that the IMF’s governance should evolve, as the global economy evolves.

“We can never be complacent, and I would expect that the IMF’s governance will continue to evolve to reflect the shifting global economic landscape,” he said.

“The Executive Board will also start discussion on the next review of our quotas, including a new quota formula that allocates the voting power in the IMF Executive Board, in the second half of this year,” Zhang said.

“An historic reform of our governance came into effect last year, bringing a shift of influence in favour of emerging market and developing countries.

The Fund and its membership recognise the growing role of the dynamic emerging market countries in the global economy,” said the top IMF official.