The head of the International Monetary Fund (IMF) on Sunday said US President Donald Trump taking office was good for the American economy in the short term, but rising interest rates and a strengthening dollar will challenge global trade.
Christine Lagarde said Trump’s plans for additional investment in US infrastructure and his likely tax reforms will boost America’s economic fortunes.
However, Lagarde acknowledged that Trump’s policies might squeeze international markets.
“That is a tightening that is going to be difficult on the global economy and for which economies have to prepare,” Lagarde said during an event at the World Government Summit in Dubai.
Asked how the world missed Trump’s rise and the United Kingdom’s vote to leave the European Union, Lagarde described a creeping, “insidious” push toward anti-globalisation and protectionist thought.
“We have been saying globalisation is great, international trade is great — and it is,” she said. “But we have not looked at those who were badly, negatively impacted.”
She blamed those negative impacts in part on the rise of robots taking jobs, as well as the shrinking gains of the global middle class.
Lagarde cautiously sidestepped questions on her thoughts about Trump being in the White House by saying “this is really a work in progress — there has been announcements, a lot of tweets, a lot of things being said.”
She stressed the importance of data and facts in making decisions.
“I know it is not fashionable at the moment, but I think that facts, figures (and) actual assessment of the reality matter and that we have to be honest about it,” she said.
The IMF in January raised the US growth estimate a tenth of a point this year to 2.3%, and four-tenths of a point to 2.5% for 2018.
The World Bank has not changed its forecasts for the United States, citing the uncertainty of Trump’s policy plans.
Both the IMF and World Bank continue to point to uncertainty as a mitigating factor for economic projections in the United States.
The two organisations are expected to announce clearer forecasts at the World Economic Outlook in April.