Home Economy IMF forecasts Nigeria economic growth to 2.6% in 2024

IMF forecasts Nigeria economic growth to 2.6% in 2024

by Business News Report

The International Monetary Fund has has projected the Nigerian economy to grow far below its population growth to 2.6 per cent. Nigeria population is estimated to grow by 3 per cent annually. The IMF in its October 2019 World Economic Outlook said that it projected that Nigeria economy will grow by 2.3 per cent in 2019, 2.5 in 2020 and 2.6 per cent by 2024. This trend if not reversed will see more Nigerians dropping into poverty and live below $2 a day. IMF however expressed concern about the global economy, as higher import tariffs are strangling manufacturing activity and international trade. Global economic growth it said in its report is projected to fall to 3 per cent rate this year, the slowest pace since the 2008 financial crisis and down from a 3.8 per cent pace seen in 2017. The IMF’s October 2019 World Economic Outlook presented here in Washington has shaved global growth this year by 0.2 percentage points and 0.1 percentage point next year, compared with the organisation’s view from July. Growth was projected to be slower in 2019 in almost every major country except Brazil. 

“The world economy is projected to grow at 3.0 per cent in 2019—a significant drop from 2017–18 for emerging market and developing economies as well as advanced economies, before recovering to 3.4 per cent in 2020. A slightly higher growth rate is projected for 2021–24. This global growth pattern reflects a major downturn and projected recovery in a group of emerging market economies. By contrast, growth is expected to moderate into 2020 and beyond for a group of systemic economies comprising the United States, euro area, China, and Japan—which together account for close to half of global GDP”. 

It said “The groups of emerging market economies that have driven part of the projected decline in growth in 2019 and account for the bulk of the projected recovery in 2020 include those that have either been under severe strain or have underperformed relative to past averages. In particular, Argentina, Iran, Turkey, Venezuela, and smaller countries affected by conflict, such as Libya and Yemen, have been or continue to be experiencing very severe macroeconomic distress. Other large emerging market economies—Brazil, Mexico, Russia, and Saudi Arabia, among others—are projected to grow in 2019 about 1 percent or less, considerably below their historical averages. In India, growth softened in 2019 as corporate and environ- mental regulatory uncertainty, together with concerns about the health of the nonbank financial sector, weighed on demand. The strengthening of growth in 2020 and beyond in India as well as for these two groups (which in some cases entails continued con- traction, but at a less severe pace) is the driving factor behind the forecast of an eventual global pickup”. 

“The risks to this baseline outlook are significant. As elaborated in the chapter, should stress fail to dissipate in a few key emerging market and developing economies that are currently underperforming or experiencing severe strains, global growth in 2020 would fall short of the baseline. Further escalation of trade tensions and associated increases in policy uncertainty could weaken growth relative to the baseline projection. Financial market sentiment could deteriorate, giving rise to a generalised risk-off episode that would imply tighter financial conditions, especially for vulnerable economies. Possible triggers for such an episode include worsening trade and geopolitical tensions, a no-deal Brexit withdrawal of the United Kingdom from the European Union, and persistently weak economic data pointing to a protracted slowdown in global growth. Over the medium term, increased trade barriers and higher trade and geopolitical tensions could take a toll on productivity growth, including through the disruption of supply chains, and the buildup in financial vulnerabilities could amplify the next downturn. 

“Finally, unmitigated climate change could weaken prospects, especially in vulnerable countries. At the multilateral level, countries need to resolve trade disagreements cooperatively and roll back the recently imposed distortionary barriers. Curbing greenhouse gas emissions and containing the associated consequences of rising global temperatures and devastating climate events are urgent global imperatives. Higher carbon pricing should be the centre piece of that effort, complemented by efforts to foster the supply of low-carbon energy and the development and adoption of green technologies. At the national level, macroeconomic policies should seek to stabilise activity and strengthen the foundations for a recovery or continued growth. Accommodative monetary policy remains appropriate to support demand and employment and guard against a downshift in inflation expectations. As the resulting easier financial conditions could also contribute to a further buildup of financial vulnerabilities, stronger macro prudential policies and a proactive supervisory approach will be critical to secure the strength of balance sheets and limit systemic risks. 

Growth has also weakened in China, where the regulatory efforts needed to rein in debt and the macro economic consequences of increased trade tensions have taken a toll on aggregate demand. Growth is projected to continue to slow gradually in coming years, reflecting a decline in the growth of the working-age population and gradual convergence in per capita incomes. Among advanced economies, growth in 2019 is forecast to be considerably weaker than in 2017–18 in the euro area, North America, and smaller advanced Asian economies. This lower growth reflects to an important extent a broad-based slowdown in industrial output resulting from weaker external demand (includ- ing from China); the widening global repercussions of trade tensions and increased uncertainty on confidence and investment; and a notable slowdown in global car production, which has been particularly significant for Germany. Growth is forecast to remain broadly stable for the advanced economy group at 13⁄4 percent in 2020, with a modest pickup in the euro area offsetting a gradual decline in US growth. Over the medium term, growth in advanced economies is projected 

It said that growth in emerging market and developing economies has also been revised down to 3.9 percent for 2019 compared to 4.5 percent in 2018 owing in part to trade and domestic policy uncertainties, and to a structural slowdown in China. The uptick in global growth for 2020 is driven by emerging market and developing economies that are projected to experience a growth rebound to 4.6 percent. About half of this rebound is driven by recoveries or shallower recessions in stressed emerging markets, such as Argentina, Iran, and Turkey, and the rest by recoveries in countries where growth slowed significantly in 2019 relative to 2018, such as Brazil, India, Mexico, Russia, and Saudi Arabia. There is, however, considerable uncertainty surrounding these recoveries, especially when major economies like the United States, Japan, and China are expected to slow further into 2020.

World trade volume growth in the first half of 2019 was 1 per cent, the weakest level since 2012.

The pessimism was stark for China with output forecast down by 0.3 percentage points this year and 0.2 percentage points next year to a 5.8 per cent growth rate. China has been hit by higher U.S. import tariffs but also slowing domestic demand following needed measures to rein in debt, the IMF said. The misery is spreading through Asia, with downward revisions for growth for Hong Kong, South Korea, and Singapore. Projected growth in Saudi Arabia was cut by 1.7 percentage points this year and output growth in India was cut by 0.9 percentage points. For 2020, global growth is projected to improve modestly to 3.4% rate, but this optimism looks “precarious,” said Gita Gopinath, the IMF’s chief economist.

The upturn is based on projected improvement in a number of emerging markets including the Middle East which are under strain like Turkey. “With uncertainty about prospects for several of these countries, a projected slowdown in China and the U.S. and prominent downside risks, a much more subdued pace of global activity could well materialise,” the IMF said. Gopinath raised the possibility of the need for emergency action in the form of “an internationally coordinated fiscal response” if economic growth were to deteriorate further. Germany should boost fiscal spending, the agency said. “A country like Germany should take advantage of negative borrowing rates to invest in social and infrastructure capital, even from a pure cost-benefit perspective,” the IMF said.

2018 2019 forecast 2020 forecast
World output 3.6 3 3.4
United States 2.9 2.4 2.1
China 6.6 6.1 5.8
Germany 1.5 0.5 1.2
Japan 0.8 0.9 0.5
United Kingdom 1.4 1.2 1.4
Canada 1.9 1.5 1.8
Mexico 2 0.4 1.3
India 6.8 6.1 5.8
Brazil 1.1 0.9 2
France 1.7 1.2 1.3
Spain 2.6 2.2 1.8
Italy 0.9 0 0.5
Russia 2.3 1.1 1.9

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