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Trump’s economic policy biggest uncertainty for global economy: expert

Zhu Min was speaking at the 7th Caixin Summit held in Beijing from November 2 to 4. Photo: Zhong Ying/

While global economy will grow at a moderate speed, the US President-elect Trump’s economic policy remains the biggest uncertainty for global economy, according to Zhu Min, a Chinese economist and former deputy managing director of the International Monetary Fund (IMF).

Zhu made the remark during the 7th Caixin Summit held in Beijing from November 2 to 4. He also predicted that the US economy will expand at a 2.8% to 3% growth rate in 2017.

According to Zhu, global GDP has been decreasing since the 2008 financial crisis, and the global economy is still weak in many aspects including GDP growth, investment, trade, capital flow, inflation, oil price, as well as interest rates.

Yet he believes being weak does not necessarily mean facing risks; rather it means not being strong.

Zhu forecast during the summit that after Trump officially runs the White House, he may intensify both the financial and tax policy, and the US will see a strong economy in the first half of 2017. But he questioned the sustainability of such a strong economy.

“The US economic growth rate is about 2.4%. Trump said he will increase the growth rate to 3.5%-4%. It is unrealistic,” Zhu said, “The market is not sure what kind of policy Trump will adopt, and this is the biggest factor for the global economy and finance.”

Zhu said while the US Federal Reserve will increase the interest rate in December, Trump’s victory in the presidential campaign has changed the Federal Reserve’s expectation on an interest rate hike.

The interest rate will continue to be raised next year, which may trigger global monetary policy adjustments, and change the global market’s risk premium, according to Zhu. It will also influence the reallocation of global capital, and US dollar may continue to strengthen.

Zhu noted that a stronger US dollar could trigger financial crisis, because it means other countries and companies need to pay high interest rates for their debts and it may bring risks to vulnerable companies and countries.

It is also difficult to predict what will be the scale of US’ financial deficit and government debt after the administration transition in the White House, he said.

“In accordance with Trump’s stimulus policy, the American economy would go back to normal, but it’s hard to say whether it will be sustainable. The American economy has spillover effects on other economies and once the American economy sees fluctuation, the whole global economy will be influenced,” Zhu remarked.

(This article is translated and edited by Chunmei.)

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