Home Cover Story IMF says Nigeria’s Economy is still very weak, cuts projection by 0.1pct

IMF says Nigeria’s Economy is still very weak, cuts projection by 0.1pct

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Okey Onyenweaku, Washington D.C, USA

Policy distortions, stagnant oil production and high inflation will be the key enemies that might prevent Nigeria from achieving its growth potentials in 2019, the World Bank has warned during the 2019 spring meetings.

As a result, the Bank reviewed down ward its projections for the country which just emerged from an election that allegedly marred with rigging, ballot box snatching among other fraudulent election practices from the previous 2.2 per cent forecast to 2.1 per cent this year, just as it projected the Sub Saharan growth forecast of 3.5 percent for 2019 from 3.0 percent in 2018.

In a briefing on Tuesday at the IMF Head Quarter 2, Conference Hall 2, 1850 North West Street Washington D.C, USA, the Chief Economist & Director of Research, IMF, Gita Gopinath also pointed out that infrastructural decay, weakening of the world economy and regulatory uncertainties were constituting a huge drag on Nigeria’s feeble economic growth.

She said “Nigeria is likely going to experience a weakening in economic growth in the year 2019 following continued weakness of the global expansion.”

 

She said: “That a year ago, economic activity was accelerating in almost all regions of the world, but a year later, much has changed. The escalation of US–China trade tensions, needed credit tightening in China, macroeconomic stress in Argentina and Turkey, disruptions to the auto sector in Germany, and financial tightening alongside the normalization of monetary policy in the larger advanced economies have all contributed to a significantly weakened global expansion, especially in the second half of 2018.”

 

She said: “With this weakness expected to persist into the first half of 2019, our new World Economic Outlook (WEO) projects a slowdown in growth in 2019 for 70 percent of the world economy. Global growth softened to 3.6 percent in 2018 and is projected to decline further to 3.3 percent in 2019. The downward revision in growth of 0.2 percentage points for 2019 from the January projection is also broad based.”

 

She said: “ It reflects negative revisions for several major economies including the euro area, Latin America, the United States, the United Kingdom, Canada, and Australia. After the weak start, growth is projected to pick up in the second half of 2019. This pickup is supported by significant monetary policy accommodation by major economies, made possible by the absence of inflationary pressures despite growing at near potential. The US Federal Reserve, the European Central Bank, the Bank of Japan, and the Bank of England have all shifted to a more accommodative stance.

 

China has ramped up its fiscal and monetary stimulus to counter the negative effect of trade tariffs. Furthermore, the outlook for US–China trade tensions has improved as the prospects of a trade agreement take shape.  These policy responses have helped reverse the tightening of financial conditions to varying degrees across countries.”

 

Emerging Markets

 

Commenting on emerging markets, Gopinath said : “ Emerging markets have experienced some resumption in portfolio flows, a decline in sovereign borrowing costs, and a strengthening of their currencies relative to the US dollar. While the improvement in financial markets has been rapid, those in the real economy have been slow to materialize. Measures of industrial production and investment remain weak for now in many advanced and emerging market economies, and global trade has yet to recover.

“ With improved prospects for the second half of 2019, global growth in 2020 is projected to return to 3.6 percent. This recovery is precarious and predicated on a rebound in emerging market and developing economies, where growth is projected to increase from 4.4 percent in 2019 to 4.8 percent in 2020. Specifically, it relies on an expected rebound in growth in Argentina and Turkey and some improvement in a set of other stressed developing economies, and is therefore subject to considerable uncertainty. Growth in advanced economies will slow slightly in 2020, despite a partial recovery in the euro area, as the impact of US fiscal stimulus fades and growth tends toward the modest potential for the group, given aging trends and low productivity growth.”

However, Nigeria’s central bank had had expressed hope that the economy would pick up in 2019, forecasting a gross domestic product growth of 3 percent, up from 1.9 percent recorded last year.

The CBN Governor, Godwin Emefiele had said the bank would maintain its tight monetary stance in 2019, and sees inflation at 11.31 percent in February and rising to 12 percent this year before moderating.

With a dismal growth of 1.9 per cent in 2018, the Nigerian economy unimpressively lost out on meeting the set target of about 3 per cent. In a mono-economy that is substantially dependent on the vagaries of the price of crude oil for revenues, not much has been put in place to galvanise productivity in other sectors for significant growth.

Sadly, this is even when the country’s population growth rate is put at above 3 per cent annually alongside a corresponding unemployment rate of 23 per cent. These continue then to defy the Economic Recovery and Growth Plan (ERGP) which industry analysts also doubt is not even being implemented even as it betrays no clear vision.

Whereas agriculture, the services and manufacturing sectors inched up in Q4, there are still challenges ahead, said market observers who also noted that even these have hardly eased the continuing threats of the rising unemployment wave among the youths. But recent reduction of Monetary Policy Rate from 14 per cent to 13.5 per cent is hoped to affect the economy positively.