Lagarde Says Trump’s Fiscal Plans Likely to Boost U.S. Economy

KAMPALA (Capital Markets in Africa) – President Donald Trump’s plans to overhaul the U.S. tax system and increase infrastructure spending should accelerate growth in the world’s biggest economy over the next two years, said International Monetary Fund Managing Director Christine Lagarde.

“We think there is a high probability of that in the next couple of years,” Lagarde said Friday in an interview in Kampala, the capital of Uganda, where she met President Yoweri Museveni.

In an economic update last week, the IMF bumped up its forecast for U.S. growth by 0.1
percentage point this year and 0.4 point for 2018. The U.S. economy will expand by 2.3 percent in 2017 before accelerating to a 2.5 percent rate in 2018, the fund said.

While Trump has promised to cut taxes and boost infrastructure spending, he’s also
threatened to impose tariffs on trade partners such as China and Mexico. Lagarde said it’s too early to predict how Trump’s other policies may impact the economy.

“On the rest, the team is waiting to see what the outcome will be,” she said. “We’re lost in conjecture for the moment.”

Protecting Borders
Since taking office last week, Trump has served notice that his administration wants to renegotiate the North American Free Trade Agreement, and provoked Mexico with a promise to build a border wall. Mexican President Enrique Pena Nieto scrapped plans to visit Washington after Trump reiterated his demand that Mexico pay for the wall.

Trump said in his inaugural address last week that every decision on trade, immigration and foreign affairs will be made to benefit U.S. workers and families. He vowed to protect America’s borders from the “ravages of other countries making our products, stealing our companies and destroying our jobs.”

Earlier this week, Lagarde visited the Central African Republic, a country to which the Washington-based fund provides concessional aid.

Lagarde said there’s “great uncertainty and concern” in Africa about how the Trump administration’s policies may impact the region. African officials are wondering whether the U.S. will continue to award aid to their countries, and how military support by United Nations peacekeepers may be affected, she said.

“They have questions, but we don’t have the answers,” Lagarde said.

The IMF was founded during the Second World War to oversee a cooperative exchange-rate system designed to avoid the beggar-thy-neighbor trade and currency policies that followed the Great Depression. In recent decades, the fund has evolved into a crisis lender for countries facing balance-of-payment deficits.

Lagarde, who was reappointed last year for a second five-year term, has argued that proponents of free trade and open markets have to do a better job of helping those left behind by globalization.