The International Monetary Fund (IMF) on Tuesday revised marginally upwards Nigeria’s real Gross Domestic Product (GDP) growth rate projections for 2019 to 2.1 percent from its January estimates of 2 percent.
This comes as the fund cut its outlook for global growth to the lowest since the financial crisis amid a bleaker outlook in most major advanced economies and signs that higher tariffs are weighing on trade.
The 2019 global growth rate would be the weakest since 2009, when the world economy shrank. It’s the third time the IMF has downgraded its outlook in six months.
The IMF also projects a moderation in Nigerian consumer prices to 11.7 percent in 2019 and 2020 from 12.1 percent in 2018.
Gita Gopinath, chief economist and director of the research department at the IMF disclosed this in the latest World Economic Outlook, at the ongoing IMF Spring meeting in Washington DC.
“Nigeria growth was reasonably strong last year and we think that things will improve a bit going forward,” Gopinath said at a press briefing in Washington.
The IMF said Brexit and softening oil prices are the main risks for Nigeria.
“What’s very important is the oil price so to the extent that other global risks transmit into a weaker oil price or there are other developments that are oil market specific that would be a factor weighing on Nigeria,” she said. The IMF chief economist said the monetary policy of Nigeria needs to be tightened further. “For monetary policy, it’s to stay tight for some more time. It has to be well communicated and transparent”.According to her, there has been some convergence on the exchange rate front, there is also much more that needs to be done there and the structural reforms, all of these has to be put in a context of reforms that help boost private sector performance.Nigeria’s current account balance is expected to shrink to 0.4 percent in 2019 from 2.1 percent in 2018 and to decline further to 0.2 percent in 2020 according to IMF projections. In sub-Saharan Africa, growth is expected to pick up to 3.5 percent in 2019 and 3.7 percent in 2020 (from 3.0 percent in 2018). The projection is 0.3 percentage point and 0.2 percentage point lower for 2019 and 2020, respectively, than in the October 2018 WEO, reflecting downward revisions for Angola and Nigeria with the softening of oil prices.
The world economy will grow 3.3 percent this year, down from the 3.5 percent the IMF had forecast for 2019 in January.
“This is a delicate moment” for the global economy, Gopinath, said.
A projected pickup in growth next year is precarious, she said.
The global volume of trade in goods and services will increase 3.4 percent this year, weaker than the 3.8 percent gain in 2018 but reduced from the IMF’s January estimate of 4 percent, the fund’s report showed.
Global economic growth will recover in the second half of this year, before plateauing at 3.6 percent from next year, according to the Washington-based fund. A series of encouraging developments have boosted optimism about the world economy in recent weeks, including the decision of the Federal Reserve to put interest-rate hikes on hold and encouraging data from China’s manufacturing sector and the U.S. job market.
Still, the IMF is warning that risks are skewed to the downside, with a range of threats menacing the global economy, including the possible collapse of negotiations between the U.S. and China to end their trade war, and the departure of Britain from the European Union without a transition agreement, known as the “no-deal” Brexit scenario.
“Amid waning global growth momentum and limited policy space to combat downturns, avoiding policy missteps that could harm economic activity needs to be the main priority,” the IMF said.
The fund cut its forecast for U.S. growth to 2.3 percent this year, down 0.2 percentage point since the IMF’s last global outlook in January. The downgrade reflects the impact of the partial government shutdown that ended in January, as well as lower-than-expected public spending. The fund upgraded its U.S. forecast next year to 1.9 percent, up 0.1 percentage point, on the Fed’s shift to a more patient stance on interest rates.
The IMF slashed its outlook for the euro area to 1.3 percent this year, down 0.3 point from three months ago. Growth is expected to be softer in several major European economies, including Germany, where weak global demand and tougher car-emission standards have hit factory production. Weak domestic demand and high sovereign-debt spreads have dimmed Italy’s outlook, while street protests in France weighed on growth, the fund said.
The IMF cut its outlook for U.K. growth to 1.2 percent this year, down 0.3 point from three months ago.
The IMF raised its forecast for Chinese growth by 0.1 point to 6.3 percent this year, while lowering its projection for growth in Japan by 0.1 point to 1 percent. The fund cut its outlook for India’s growth this year to 7.3 percent, down from 7.5 percent in January.
Hope Moses-Ashike in Washington DC
