The World Bank Group on Tuesday revised their global growth estimate for 2020 and their outlook for 2021. Following the worst global recession in decades that occurred in 2020, the World Bank Group says the world economy appears to be beginning what they term “a subdued recovery”.
They forecast 4 percent growth in 2021, but only 1.6 percent may be possible if the pandemic is not fully controlled or if vaccine distribution gets delayed. In their recent global economic prospect report, the World Bank posits that the global economy contracted by -4.3% in 2020 less severe than its earlier expectation of -5.2%.
However, the growth forecast for 2021 was lowered to 4% as against the 4.2% forecasted earlier. Even with the expected 4% growth in 2021, the global economy would remain more than 5% below pre-pandemic projections.
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Nigeria’s growth was forecasted to resume at 1.1% in 2021 and subsequently edge up to 1.8% in 2022. This forecast seems a little watered down as Nigeria might subsequently out-perform the 1.1% growth prediction and hit a 2% growth rate in 2021. This is premised on three major assumptions:
First is that oil prices continue to trade around $50 per barrel, which is a realistic expectation. Saudi Arabia is discussing cutting another 1 million barrels (before OPEC’s meeting) and also taking into consideration the UK lockdown as households consume more energy due to the winter. This would help keep oil prices around $50 or late $40s.
The second assumption is premised on the fact that another lockdown in Nigeria is unlikely because the vaccines would have proven to be successful.
Third, the covid-induced lockdown which stalled economic activity and tipped the country into a recession happened in Q2 2020. And since another lockdown is unlikely business activity will pick up in Q2 2021. As a result some growth in the economy can be expected.
Basically, the comparison between a dormant year and an active year would definitely result in significant growth (all things being equal).
In summary, achieving 2% growth in 2021 is possible if the following assumptions prevail:
There is no other lockdown as a result of vaccine reliability, availability and distribution; crude oil continues to trade around $50/barrel, and Nigeria continues to pump 2 million barrels/day.
However, how the economy is likely to perform in 2021 is nothing compared with how it did in 2019. a comparison of how the economy performed in 2019 — it does not even come close to matching it. Actually, the results would indicate that the economy is not growing.
In a nutshell, as the vaccines continue on its path to success, the hope of re-opened economies inches closer to reality. Hence, the whole wire goes down to what happens with the vaccine. Thus, the vaccine is the exit strategy; o vaccine, no economic activity, no growth) period!
