Davos WEF
Davos WEF

IMF’s global growth forecast unchanged amid uncertainty over Trump... but the US will get a boost

Jabin Botsford | The Washington Post via Getty Images

Global uncertainty as a result of a looming Donald Trump presidency has caused the International Monetary Fund (IMF) to leave its worldwide growth forecasts unchanged for 2016 and 2017 — but saw an uptick for the U.S economy from Trump's proposed stimulus package.

In its World Economic Outlook report, published Monday, the IMF projected global growth at 3.1 percent in 2016 and 3.4 percent in 2017 – both unchanged from its October forecasts. 

However, in the U.S., the IMF predicted a lift for the economy, thanks to the stimulus package proposed by President-elect Donald Trump. The fund forecasts that fiscal stimulus will lead to an increase in growth to 2.3 percent in 2017 and 2.5 percent in 2018 - a half-percentage point increase on the October forecast. 

The IMF also predicted an uptick in global economic activity in the years ahead which could help worldwide growth reach 3.6 percent in 2018.

Donald Trump is scheduled to be inaugurated as president of the U.S. on Friday with investors on standby to see whether his election-promises are to unfold as planned. The IMF cited the uncertainty of a new U.S. administration as reason to leave forecasts unchanged in January and instead look to be more specific in April as Trump's policies begin to be rolled out.

Increased geopolitical tension

Trump has vowed to make a fast start to his presidency and implement several campaign policies as soon as possible, such as increased infrastructure spending, deregulation and tax cuts. However, investors hoping for thorough details of these plans were left disappointed at the President-elect's first press conference last Wednesday.

The IMF also predicted oil prices would edge higher and support global growth as a result of the landmark deal among OPEC members to curtail oil production. Since the deal was struck in November, investors have remained skeptical that OPEC members would be able to adhere to an oil production cut of 1.2 million barrels per day (b/d) to 32.5 million b/d from January 1. 

Global economic activity was cited as a notable upside risk should policy stimulus prove to be larger than projected in either the U.S. or China. Despite predictions of rising economic activity, the IMF cited negative risks which included a global shift towards protectionism, increased geopolitical tensions and signs of a severe slowdown in China.

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