The International Monetary Fund (IMF) has lowered Nigeria’s economic growth outlook by 0.2 percentage point to 3.2% amid growing uncertainty around the world.
In its October update to the World Economic Outlook (WEO) published yesterday, the Fund projected that the country’s gross domestic product (GDP) would grow 3.2% this year and decline as much as 3% in 2023. Both estimates are 20 basis points (bps) behind the July forecast.
The Institution had maintained in July the April forecast for this year at 3.4 percent. The country’s GDP grew 3.4 percent in the first quarter of the year (Q1 ’22) but slowed to 3.1 percent in the second quarter (Q2 ’22).
The average performance so far is below the growth projected by the Federal Government for the year.
The IMF also cut sub-Saharan Africa’s growth from 3.8 to 3.6 percent, while the global economy, hit by the cost-of-living crisis and geopolitical tensions, is forecast to grow by 3.2 percent. percent this year and 2.7 percent next. year, a sharp drop from last year’s six percent rise.
“The global economy is experiencing a series of turbulent challenges. Higher inflation than seen in decades, tightening financial conditions in most regions, the Russian invasion of Ukraine and the lingering COVID-19 pandemic weigh heavily on the outlook. The normalization of monetary and fiscal policies that provided unprecedented support during the pandemic is cooling demand as policymakers aim to bring inflation back to target.
“But a growing share of economies are in slowing growth or in outright contraction. The future health of the global economy critically depends on the successful calibration of monetary policy, the course of the war in Ukraine, and the possibility of further pandemic-related supply-side disruptions, for example, in China. Global growth is projected to slow from six percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023. This is the weakest growth profile since 2001, except for the global financial crisis and the acute phase of the COVID-19 pandemic and reflects significant slowdowns for the largest economies,” the IMF said.
The report underscored an “unusually large” risk to the outlook. He pointed to monetary normalization, high inflation and the war between Russia and Ukraine as some of the risks facing growth. He warned that monetary policy could miscalculate the correct tightening stance to cool inflation.
Economists have warned that excessive tightening by central banks could plunge the global economy into a deeper-than-expected contraction that is capable of causing a major crisis.
But central bank chiefs, led by Jerome Powell of the Federal Reserve System, have paid little heed, insisting that controlling inflation is the priority.
This week, at the ongoing World Bank/IMF Annual Meetings, central bankers around the world face tough questions about how to strike a balance between sustaining modest growth after the COVID-19 halt and curbing excessive inflation. An increased number of central banks have been forced into monetary tightening, fueling de-risking around the world.
Consequently, the US dollar index, a measure of the dollar’s strength against other paired currencies, reached a level not seen since the early 2000s, leading to a close peg between the safe-haven currency and the US dollar. pound sterling. At the time of publication, the dollar was trading at 0.97 euros and 1.1 dollars.