The International Monetary Fund (IMF) has predicted a short-term boost to the global economy, thanks to Donald Trump’s corporate recent tax cuts.
The IMF released its latest World Economic Outlook (WEO) report at the annual Davos in Switzerland, the global growth forecast was increased by 0.2 percentage points to 3.9 percent for both 2018 and 2019.
“We are quite upbeat for immediate future, but what we’re seeing in the more medium-term gives us ground for worry,” said Christine Lagarde, the IMF’s managing director.
According to the report, the economic gains will be short term and there will be risks on the horizon from a potentially sharp drop in markets after the recent surge in equity valuations.
Trump’s new tax plan massively simplifies the current tax system, reducing the number of tax brackets to just three. The US President has said that it will help the ‘normal’ family and would not benefit the “wealthy or well-connected”.
“It’s not good for me, believe me,” he said. “What is good for me is if everything takes off like a rocketship, like it should have for 20 years. That’s good for me.”
Since his unveiled tax plan, Barclays has said the changes will dent the bank’s capital position and reduce the lender’s ability to deduct past losses against future tax bills.
“Due to the uncertain practical and technical application of many of these provisions, it is currently not possible to reliably estimate whether BEAT will apply and if so, how it would impact Barclays,” the lender said in a statement.
Other companies have also made changes in regards to the new corporate tax rate.
Walmart (NYSE: WMT) announced earlier this month that it plans to raise entry-level wages for hourly employees to $11 an hour.
President and chief executive officer Doug McMillon said Walmart is “in the early stages of assessing the opportunities tax reform creates for us to invest in our customers and associates and to further strengthen our business, all of which should benefit our shareholders,”
Wells Fargo (NYSE: WFC) and AT&T (NYSE: T) have also promised to pass on benefits to employees in the form of pay rises or bonuses.