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IMF lowers economic growth projection for Nigeria to –5.4%

…says global crisis ‘like no other’

Nigerian economy is now expected to shrink by 5.4% in 2020, as impact of the coronavirus pandemic bites harder coupled with effects of weak oil prices.

This is according to the International Monetary Fund (IMF), which had in April projected a 3.4% contraction for the year, but now thinks that the ongoing economic crisis would be more intense, not just for the country but globally. Nigerian economy is however, expected to return to positive growth of 2.6% in 2021.

The global lender disclosed this in its latest edition of the World Economic Outlook report (WEO) released on Wednesday.

The IMF also projects that global growth will shrink by 4.9 percent in 2020, 1.9 percentage points below the April 2020 WEO forecast.

 “The disruptions due to the pandemic, as well as significantly lower disposable income for oil exporters after the dramatic fuel price decline, imply sharp recessions in Russia (–6.6 percent), Saudi Arabia (–6.8 percent), and Nigeria (–5.4 percent), while South Africa’s performance (–8.0 percent) will be severely affected by the health crisis,” it said in the report.

The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast. In 2021 global growth is projected at 5.4 percent.

Overall, this would leave 2021 GDP some 6½ percentage points lower than in the pre-COVID-19 projections of January 2020.

For the first time, the IMF projects negative growth across economies and regions, apart from China which has been projected to stay positive at just 1%.

Growth in the advanced economy group is projected at –8.0 percent in 2020, 1.9 percentage points lower than in the April 2020 WEO.

Synchronized deep downturns are foreseen in the United States (–8.0 percent); Japan (–5.8 percent); the United Kingdom (–10.2 percent); Germany (–7.8 percent); France (–12.5 percent); Italy and Spain (–12.8 percent).

In 2021 the advanced economy growth rate is projected to strengthen to 4.8 percent, leaving 2021 GDP for the group about 4 percent below its 2019 level.

Among emerging market and developing economies, the hit to activity from domestic disruptions is projected closer to the downside scenario envisaged in April, more than offsetting the improvement in financial market sentiment.

The downgrade also reflects larger spillovers from weaker external demand. The downward revision to growth prospects for emerging market and developing economies over 2020–21 (2.8 percentage points) exceeds the revision for advanced economies (1.8 percentage points).

 Excluding China, the downward revision for emerging market and developing economies over 2020–21 is 3.6 percentage points.

Overall, growth in the group of emerging market and developing economies is forecast at –3.0 percent in 2020, 2 percentage points below the April 2020 WEO forecast.

Growth among low-income developing countries is projected at –1.0 percent in 2020, some 1.4 percentage points below the April 2020 WEO forecast, although with differences across individual countries.

Excluding a few large frontier economies, the remaining group of low-income developing countries is projected to contract by –2.2 percent in 2020.

The IMF equally noted that the adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s.

As with the April 2020 WEO projections, there is a higher-than-usual degree of uncertainty around the latest forecast.

“The baseline projection rests on key assumptions about the fallout from the pandemic.

“In economies with declining infection rates, the slower recovery path in the updated forecast reflects persistent social distancing into the second half of 2020; greater scarring (damage to supply potential) from the larger-than-anticipated hit to activity during the lockdown in the first and second quarters of 2020; and a hit to productivity as surviving businesses ramp up necessary workplace safety and hygiene practices.

“For economies struggling to control infection rates, a lengthier lockdown will inflict an additional toll on activity.

“Moreover, the forecast assumes that financial conditions—which have eased following the release of the April 2020 WEO—will remain broadly at current levels.

Alternative outcomes to those in the baseline are clearly possible, and not just because of how the pandemic is evolving,” the IMF further notes.

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