In response to growing unpredictability around the world, the International Monetary Fund (IMF) has lowered Nigeria’s economic growth potential by 0.2 percentage points to 3.2%.
The International Monetary Fund (IMF) predicted that the country’s gross domestic product (GDP) would increase by 3.2% this year and then decline to 3% in 2023 in its October World Economic Outlook (WEO) report, which was published yesterday. Both estimates behind July projections by 20 basis points (bps).
The Institution had kept its April prediction for this year’s growth at 3.4% in July. GDP growth in the nation was 3.4% in the first quarter of the year (Q1 ’22), but it fell to 3.1% in the second.
The Federal Government’s anticipated increase for the year has not been met by the average performance thus far.
The IMF also reduced sub-Saharan Africa’s growth from 3.8% to 3.6%, while the global economy, which is already under pressure from the cost-of-living issue and geopolitical unrest, is forecast to rise by 3.2% this year and 2.7% next, a sharp decline from the 6% growth seen last year.
“The global economy is experiencing a number of turbulent challenges. Inflation higher than seen in several decades, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook. Normalisation of monetary and fiscal policies that delivered unprecedented support during the pandemic is cooling demand as policymakers aim to lower inflation back to target.
“But a growing share of economies are in a growth slowdown or outright contraction. The global economy’s future health rests critically 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 forecast to slow from six per cent in 2021 to 3.2 per cent in 2022 and 2.7 per cent 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,” IMF said.
An “unusually substantial” risk to the forecast was supported by the report. It identified monetary normalization, high inflation, and the conflict between Russia and Ukraine as some of the dangers impeding growth. It issued a warning that the proper posture of tightening monetary policy to reduce inflation would be miscalculated.
The global economy could see a more severe downturn than anticipated, which could trigger a catastrophic crisis, according to economists who have warned against excessive tightening by central banks.
However, the leaders of the central banks, like Jerome Powell of the Federal Reserve System, have paid little notice, certain that reducing inflation should come first.
Central bankers from all across the world are being grilled this week at the World Bank/IMF Annual Meetings on how to strike a balance between maintaining the moderate growth seen after the COVID-19 disruption and containing excessive inflation. More central banks have become ensnared in monetary tightening, which has fueled de-risking globally.
As a result, the U.S. Dollar Index, which gauges the dollar’s strength versus other matched currencies, has reached a level not seen since the early 2000s, bringing the safe haven currency and the pound sterling close to parity. At the time of publication, the dollar was selling for $0.97 and $1.1.
