IMF Raises Nigeria’s Growth Forecast for 2022, retains Growth Projections for 2021

Nume Ekeghe

The International Monetary Fund (IMF) has revised upward its growth forecast for the Nigerian economy in 2022 by 0.3 per cent to 2.6 per cent compared to its earlier projection in its April edition while it retained its growth forecast for 2021.

Division Chief, Research Department, IMF, Malhar Nabar, revealed the growth projections while responding to a THISDAY question, during a virtual media briefing on the World Economic Outlook (WEO) yesterday

Speaking on the theme of the WEO, “Fault Lines Widen in the Global Recovery,” he stated that the reemergence of fuel subsidy and rise in security was hindering growth.

According to Nabar, “In terms of our forecast for Nigeria this year, we have maintained an unchanged forecast of 2.5 per cent and we have upgraded slightly for 2022 to 2.6 per cent. The reason for the unchanged forecast for this year is because it is a product of opposing developments. We saw activities as elsewhere respond a lot stronger than what we expected earlier in the year.”

“Looking out ahead, we think that up take in cases in the rest of the continent is going to pose a downside risk factor and is going to drag on growth going forward.

“In terms of our upgrade in 2022, it is related to the improvements in terms of trade, the oil production we expect to increase going forward would lift growth for 2022. It is also predicated on continued in external financial conditions which recently have been very supportive of growth and it important that continues in order for this growth forecast to pan out.”

He further noted the recent access to its emergency financing facilities was able to relieve some of Nigeria’s foreign exchange (FX) liquidity problems.

He added: “Nigeria has been a beneficiary of our IMF funding; it has accessed our emergency financing facilities last year and that is also contributing to this outlook by alleviating some of the liquidity needs the Nigerian economy face.”

Furthermore, on emerging market economies, the report projected fiscal deficit for 2021 is 7.1 per cent of GDP which is 0.5 percentage point smaller than in the April 2021 WEO.

On Nigeria, the report states: “In low income developing countries, the overall fiscal deficit in 2021 was revised up by 0.3 percentage points from the April 2021 WEO, mainly because of the reemergence of fuel subsidies as well as the additional COVID-19 and security related support in Nigeria.

“Still, at 5.2 percent of GDP, the overall fiscal deficit remains well below that of advanced and emerging market economies, reflecting financing constraints about 60 percent of Low income and developing countries (LIDCs) are assessed to be at high risk of or in debt distress. The public debt-to-GDP ratio for 2021 is projected at 48.5 percent. Several LIDCs have announced an intention to restructure their debts and some have sought debt relief under the G20 Common Framework (Chad, Ethiopia, and Zambia). Once the recovery is firm, achieving debt sustainability while pursuing the United Nations Sustainable Development Goals will require raising domestic revenues, improving spending efficiency, developing medium-term fiscal frameworks, and undertaking structural reforms to facilitate private sector activity.”

It added: “As part of preparing medium-term fiscal plans, countries should undertake an analysis of risks and mitigation measures. This is important given lower buffers, an uncertain outlook, and fiscal vulnerabilities including COVID-19 loans and credit guarantees to firms that could be realized over several years. As with growth, risks across countries also diverge. Countries, particularly those with high debt and non-reserve currencies, will have less room to maneuver if global interest rates rise more than expected.”

On Sub-Saharan Africa, it stated that the projection also remains unchanged from its previous predictions, which it pegged at 3.4 percent, “however we had a slight adjustment upwards by 0.1 percent for 2022 to 4.1 per cent growth. The 2021 forecast for sub-Saharan Africa is unchanged relative to the April WEO, with an upgrade for South Africa following a strong positive surprise in the first quarter offset by downward revisions in other countries. The worsening pandemic developments in sub-Saharan Africa are expected to weigh on the region.

“In some emerging market and developing economies in sub-Saharan Africa and the Middle East and Central Asia, food prices have increased significantly amid shortages and the rise in global food prices. Currency depreciation has also lifted prices of imported goods, further adding to overall inflation. Core inflation which removes the influences of energy and food prices however remains contained for the most part.”