President-elect Donald Trump’s tax cuts and spending
plans could deliver a shot in the arm to the U.S. economy, lifting
growth around the world, although uncertainty about his trade policies
adds to the risks, according to the World Bank.
The Trump administration could squander the economic gains of fiscal
stimulus if it imposes new trade barriers that provoke retaliation by
other countries, the Washington-based development lender said Tuesday in
the latest update to its global economic outlook.
Overall, it’s too early to assess what the net impact will be of
Trump’s economic policies, the World Bank said. Accordingly, it left its
forecast for U.S. growth this year and next unchanged, at 2.2 percent
and 2.1 percent, respectively. The outlook doesn’t incorporate the
expected effect of Trump’s policy proposals, according to the report.
The bank projects the world economy will grow 2.7 percent in 2017,
down 0.1 percentage point from its forecast in June. Stalling trade,
weak investment and heightened policy uncertainty have dampened global
economic activity, pushing growth down to an estimated 2.3 percent last
year -- the slowest rate since the financial crisis.
The World Bank estimates global growth will pick up to 2.9 percent next year, also down 0.1 percent from its June call.
Brexit Uncertainty
The development lender sees the euro zone expanding at a 1.5 percent
rate this year with uncertainty lingering as the U.K. starts
negotiations to withdraw from the European Union, which will weigh on
growth this year and next. Japan is seen growing 0.9 percent this year,
while China’s output is set to expand 6.5 percent, the World Bank said.
U.S. growth could accelerate to as much as 2.5 percent this year and
2.9 percent in 2018 if the Trump administration follows through on a
pledge to cut the corporate income-tax rate from 35 percent to 15
percent, and slash individual rates, the World Bank estimates.
“When you have this combination of tax cuts, you have a positive
outcome on investment and personal consumption,” Ayhan Kose, director of
the bank’s Development Prospects Group, said in an interview.
A U.S. pickup on that scale would boost global growth by 0.1
percentage point in 2017 and at least 0.3 point next year, depending on
the timing of the tax cuts and the response of the Federal Reserve,
according to the development lender.
The World Bank said Trump’s plan to boost infrastructure spending
could also lift growth, but it cautioned that the benefits could be
offset if overall federal spending falls.
President Obama mentioned in his farewell speech that no foreign
terrorist organization has planned and executed an attack on the
homeland. 
