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IMF official discounts tax reform as impetus for US growth

U.S. growth prospects for this year and next depend more on a strong consumer and business environment than on any stimulus effect from tax reform proposals, the head economist for the International Monetary Fund said.

"At the start of this year, we felt that some form of fiscal stimulus was highly likely," Maurice Obstfeld, IMF chief economist said at the organization’s annual meeting in Washington, D.C., on Oct. 10. Now, however, he said the IMF was in "wait and see mode."

Though the IMF revised its expectation for global growth upward to 3.6% in 2017 and 3.7% in 2018, according to its most recent World Economic Outlook, it slightly downgraded the U.S. to 2.2% this year and 2.3% in 2018, mostly because of the failure to enact legislative reforms of the tax structure and healthcare.

A lack of details in the recent outline for tax reform released by administration and Congressional officials leaves it unclear how much stimulus will be achieved by any legislation that might be passed, as well as its effect on the fiscal deficit, Obstfeld said.

Most important for growth purposes is that tax reform, in whatever form it takes, should not increase the U.S. debt level, he said.

"In the medium term it should be revenue enhancing," he said. "The U.S. could use more revenue for things like infrastructure investment."