World econ­omy needs Trump to build bridges

Kuwait Times - - BUSINESS -

Pres­i­dent-elect Don­ald Trump’s big-spend­ing plan to re­vi­tal­ize US in­fras­truc­ture could be just the ticket to drag the world econ­omy out of its post-cri­sis tor­por, ex­perts say. But there is a huge caveat, they warn: the plan’s ben­e­fits would be eroded if Trump ex­e­cutes his avowed aim of put­ting “America first” and tear­ing up com­mer­cial pacts, po­ten­tially ig­nit­ing a trade war.

The Repub­li­can prop­erty ty­coon’s team says he will de­vote $550 bil­lion to re­build­ing de­crepit highways, bridges, tun­nels, air­ports, schools and hospi­tals some­thing that Pres­i­dent Barack Obama failed to per­suade Repub­li­cans in Congress to back. The idea has sup­port from the In­ter­na­tional Mone­tary Fund, the Fed­eral Re­serve and Democrats, all keen to see the United States raise its pro­duc­tive ca­pac­ity, de­spite the like­li­hood it will also ramp up its debt.

“All pub­lic money in­vested in US in­fras­truc­turewhich badly needs it-can only be wel­come,” said Lu­dovic Subran, chief econ­o­mist at the trade in­sur­ance com­pany Euler Her­mes. The United States suf­fers from con­gested highways, col­laps­ing bridges and a ram­shackle rail net­work. Be­moan­ing the state of US air­ports dur­ing the elec­tion cam­paign, Trump said “we’ve be­come a Third World coun­try”. Economies fur­ther afield would ben­e­fit at a time when Europe and Ja­pan are strug­gling with the de­bil­i­tat­ing ef­fects of de­fla­tion or anaemic growth.

“In­fla­tion would spread ev­ery­where in the world,” in a wel­come filip to the cen­tral banks of Europe and Ja­pan, ac­cord­ing to Lau­rent Geron­imi, a se­nior as­set man­ager at the pri­vate bank Swiss Life.

In­deed, the bond markets have al­ready sig­nalled as much with tril­lions of dol­lars wiped off val­u­a­tions since Trump’s elec­tion-a sign that in­vestors ex­pect a debt-fu­elled spend­ing splurge to drive up in­ter­est rates. That would ben­e­fit mil­lions of savers and in­vestors in pen­sion funds who have strug­gled since the 2008 fi­nan­cial cri­sis ush­ered in a pe­riod of rock-bot­tom rates across the West.

Emerg­ing markets could also win out if the dol­lar con­tin­ues its re­cent bull run sparked by ex­pec­ta­tions of higher in­fla­tion and bor­row­ing costs.

“If the Amer­i­can cur­rency ap­pre­ci­ates, that’s a good thing for us be­cause we are ex­porters of oil and of raw ma­te­ri­als that are priced in dol­lars. And when the dol­lar ap­pre­ci­ates, we earn a bit more,” said Lu­cas Abaga Nchama, gover­nor of the Bank of Cen­tral African States. — AFP

PITTSBURG: Job re­cruiters work their booths at a job fair in Pitts­burgh. The La­bor Depart­ment re­ported on the num­ber of first-time ap­pli­ca­tions who ap­plied for unemployment ben­e­fits in the pre­vi­ous week yes­ter­day. — AP

BEI­JING: A mag­a­zine fea­tur­ing a cover story about US Pres­i­dent-elect Don­ald Trump is seen at a news stand in Bei­jing yes­ter­day. — AFP

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