IMF Upgrades Nigeria’s Growth Prospects Slightly to 3.2%

Nume Ekeghe

The International Monetary Fund (IMF) in its latest World Economic Outlook (WEO) has revised upward its 2023 growth forecast for Nigeria by 0.2 per cent to 3.2 per cent compared to its earlier projection in its WEO released in October 2022.

The Brentwood institution in its WEO released yesterday also kept its growth forecast for the country for 2024 unchanged at 2.9 per cent.

The report also stated that improved growth projection for Nigeria impacted positively the forecast for Sub-Saharan Africa (SSA) which saw a slight upward review form 3.7 per cent to 3.8 per cent in 2023, whilst 2024 prospect for the continent remained at 4.1 per cent.

Explaining further its projection for Africa, it stated: “In SSA, growth is projected to remain moderate at 3.8 per cent in 2023 amid prolonged fallout from the COVID-19 pandemic, although with a modest upward revision since October, before picking up to 4.1 percent in 2024.

“The small upward revision for 2023 (0.1 percentage point) reflects Nigeria’s rising growth in 2023 due to measures to address insecurity issues in the oil sector.”

Commenting further about the WEO, the Chief Economist and Director Research Department IMF, Pierre-Olivier Gourinchas, during a press briefing to unveil the report noted that the region’s growth was constantly affected by external forces and warned of looming food insecurity in the region.

He said: “What I can say is that we have a difficult year for the region that is very much affected by the external forces that are shaping the global outlook, whether it’s the Russian war in Ukraine and the energy crisis or the fight against inflation and the tightening of global financial conditions that comes with that.

“So, growth is projected to be around 3.8 per cent in Sub-Saharan Africa, and this is quite a bit below the typical growth rates that the region experienced before the pandemic.

“And in addition, in the region, there is an issue of food insecurity, even though the food price index has come back to pre-war levels, the levels we had about a year ago or a little bit more than that.

“It is still elevated compared to pre-pandemic times and there are in many countries, a large portion of the population may be subject to food insecurity.”

Further commenting on inflation globally, Gourinchas noted: “Monetary policy has started to bite, with a slowdown in new home construction in many countries. Yet, inflation-adjusted interest rates remain low or even negative in the euro-area and other economies, and there is significant uncertainty about both the speed and effectiveness of monetary tightening in many countries.

“Where inflation pressures remain too elevated, central banks need to raise real policy rates above the neutral rate and keep them there until underlying inflation is on a decisive declining path. Easing too early risks undoing all the gains achieved so far.”

He stated that the financial environment remains fragile, especially as central banks embark on an uncharted path toward shrinking their balance sheets.

“It will be important to monitor the build-up of risks and address vulnerabilities, especially in the housing sector or in the less-regulated non-bank financial sector.

“Emerging market economies should let their currencies adjust as much as possible in response to tighter global monetary conditions. Where appropriate, foreign exchange interventions or capital flow measures can help smooth volatility that’s excessive or not related to economic fundamentals.”

“Many countries responded to the cost-of-living crisis by supporting people and businesses with broad and untargeted policies that helped cushion the shock.

“Many of these measures have proved costly and increasingly unsustainable. Countries should instead adopt targeted measures that conserve fiscal space, allow high energy prices to reduce demand for energy, and avoid overly stimulating the economy.

“Supply-side policies also have a role to play. They can help remove key growth constraints, improve resilience, ease price pressures, and foster the green transition. These would help alleviate the accumulated output losses since the beginning of the pandemic, especially in emerging and low-income economies,” he said.