Nigeria’s overall economic growth prospect is expected to remain subdued at -1.7 percent on account of soft oil prices and a weak currency, the International. Monetary Fund (IMF) said in its October World Economic Outlook (WEO) just released. But the IMF sees growth rebounding, albeit slowly to 0.6 percent in 2017.
The anticipated 1.7 percent contraction however shows a 0.1 percent improvement from the 1.8 negative growth forecast by the IMF earlier in July projections.
Nigerian economy slipped into recession following another contraction in Q2, 2016 as shocks associated with energy shortages and price hikes, scarcity of foreign exchange and depressed consumer demand, among others, apparently proved to be more damaging than expected.
The National Bureau of Statistics data showed domestic output in Q2, 2016 contracted by 2.06 percent, a decline of 1.70 percentage points in output from the -0.36 per cent recorded in Q1, and 4.41 percentage points lower than the 2.35 per cent growth in the corresponding period of 2015. The non-oil sector contracted by 0.38 per cent, compared with the 0.18 per cent contraction in the preceding quarter.
The Nigerian government authorities say their strategy is to spend the country out recession in the shortest possible time and have injected up to N770 billion capital to hold massive infrastructure that would create jobs.
Experts, however think the return to growth may not happen in the immediate as further confirmed by the IMF WEO of possible growth rebound only by 2017.
In the report, the IMF notes that Sub-Saharan Africa is also expected to decelerate to 1.4 percent on account of subdued by weak commodity exporting economies like Nigeria. But the sub-region’s growth is expected to pick up by 2017 to 2.9 percent.
According to the IMF, activity has been “weakened in sub-Saharan Africa, led by Nigeria, where production was disrupted by short- ages of foreign exchange, militant activity in the Niger Delta, and electricity blackouts.”
Global growth is projected to slow to 3.1 percent in 2016 before recovering to 3.4 percent in 2017.
The forecast, revised down by 0.1 percentage point for 2016 and 2017 relative to April, reflects a more subdued outlook for advanced economies following the June U.K. vote in favor of leaving the European Union (Brexit) and weaker-than-expected growth in the United States.
These developments have put further downward pressure on global interest rates, as monetary policy is now expected to remain accommodative for longer. Although the market reaction to the Brexit shock was reassuringly orderly, the ultimate impact remains very unclear, as the fate of institutional and trade arrangements between the United Kingdom and the European Union is uncertain.
Financial market sentiment toward emerging market economies has improved with expectations of lower interest rates in advanced economies, reduced concern about China’s near-term prospects following policy support to growth, and some firming of commodity prices.
But prospects differ sharply across countries and regions, with emerging Asia in general and India in particular showing robust growth and sub-Saharan Africa experiencing a sharp slowdown.
In an opening statement at the WEO Press Conference in Washington, Maurice Obstfeld, Economic Counsellor and Director of the Research Department at the IMF
notes that Global growth remains weak, even though it shows no noticeable deceleration over the last quarter.
“In short, growth has been too low for too long, and in many countries its benefits have reached too few—with political repercussions that are likely to depress global growth further,” he told journalists at the press conference coming just ahead of the official commencement of the IMF/World Bank 2016 Annual meetings.
These concerns, according to him highlight the risks to the IMF projections, which remain tilted to the downside.
“The new World Economic Outlook sees a slowdown for the group of advanced economies in 2016 and an offsetting pickup for emerging and developing economies.
“Taken as a whole, the world economy has moved sideways. Without determined policy action to support economic activity over the short and longer terms, sub-par growth at recent levels risks perpetuating itself—through the negative economic and political forces it is unleashing,” Obstfeld further notes.
“We project global output growth at 3.1 percent in 2016 and 3.4 percent in 2017—the same as in early July, shortly after the United Kingdom’s “Brexit” vote to leave the European Union. Within this broad outlook, however, we have slightly marked down 2016 growth prospects for advanced economies while marking up those in the rest of the world.
“Prospects for 2017 are unchanged for both country groupings. Over the medium term, while we expect that advanced economies will continue along a disappointingly low growth path, emerging market and developing economies should accelerate as most of the large countries with currently shrinking economies stabilize and return to their longer-term growth paths,” he told journalists.
He further raised the concerns that the presumed recovery in 2017 and beyond, could be derailed by several, possibly interacting developments: a bumpy transition in China, a sharp further fall in commodity prices, a tightening in global financial conditions, or a sharp hike in trade barriers. Geopolitical tensions could flare up, adding to the humanitarian crises already afoot in the Middle East and Africa and further complicating the policymaking environment.
An upside outcome would be the adoption by many countries of comprehensive, consistent, and coordinated policies that exploit synergies across instruments, time, and countries to boost growth and make it more inclusive.
