IMF retains Nigeria’s economic growth projection at 3.2% as global inflation decelerates

 

By Collins Olayinka, Abuja

The International Monetary Fund (IMF) has projected Nigeria’s economy to grow at 3.2 per cent this year (holding on to its January projection) adding that growth will slow by 0.2 percentage points next year to three per cent as global inflation is expected to continue to decelerate 

The Fund also expects growth to slow down by 0.2 percentage points from its earlier January forecast to 3.6 per cent this year and achieve faster growth of 4.2 per cent next year.

In its world economic outlook projections released yesterday, at the ongoing Springs Meeting in Washington DC, IMF also forecast global growth to fall from last year’s 3.4 per cent to 2.8 per cent before rising to three per cent in 2024.

While the Bretton Woods institution said the global economic recovery from the COVID-19 and Russian-Ukraine war is on track, it cautioned that the recovery is still in a fragile state.

It observed that tentative signs in early 2023 that the world economy could achieve a soft landing – with inflation coming down and growth steady – have receded amid stubbornly-high inflation and recent financial sector turmoil.

It noted that while inflation has declined as central banks have raised interest rates and food and energy prices have come down, underlying price pressures are proving sticky, with labour markets tight in a number of economies.

The report also said side effects from the fast rise in policy rates are becoming apparent, as banking sector vulnerabilities have come into focus and fear of contagion has risen across the broader financial sector, including non-bank financial institutions, saying policymakers have taken forceful actions to stabilise the banking system.

The IMF hinted that the major forces that shaped the world economy in 2022 seem set to continue into the year, but with changes in their intensities.

Debt levels remain high, limiting the ability of fiscal policymakers to respond to new challenges, it said.

On the raging war in Ukraine, the report said: “Commodity prices that rose sharply following Russia’s invasion of Ukraine have moderated, but the war continues, and geopolitical tensions are high. Infectious COVID-19 strains caused widespread outbreaks last year, but economies that were hit hard – most notably China – appear to be recovering, easing supply-chain disruptions. Despite the fillips from lower food and energy prices and improved supply-chain functioning, risks are firm to the downside with the increased uncertainty from the recent financial sector turmoil.”

It observed that the baseline forecast, which assumes that the recent financial sector stresses are contained, is for growth to fall from 3.4 per cent in 2022 to 2.8 per cent in 2023, before rising slowly and settling at three per cent five years – the lowest medium-term forecast in decades.

“Advanced economies are expected to see an especially pronounced growth slowdown, from 2.7 per cent in 2022 to 1.3 per cent in 2023. In a plausible alternative scenario with further financial sector stress, global growth declines to about 2.5 per cent in 2023 – the weakest growth since the global downturn of 2001, barring the initial COVID-19 crisis in 2020 and during the global financial crisis in 2009 – with advanced economy growth falling below one percent,” it stated.