President Muhammadu Buhari’s assertion in his Independence Day broadcast at the weekend that Nigeria’s recession will not last may be true after all; as the International Monetary Fund (IMF) yesterday projected that the country’s economy will grow by 0.6 per cent in 2017.
In its October 2016 World Economic Outlook (WEO) released yesterday, the IMF also forecast that Nigeria’s economy will contract 1.7 per cent this year, less than the 1.8 per cent the IMF earlier forecast. Nigeria’s economy was earlier estimated to shrink by 1.8 per cent in 2016, but the latest version of the WEO has reviewed positively the country’s economy to a contraction of just 1.7 per cent.
However, the Fund said the global economy would remain subdued and expand by 3.1 per cent this year, unchanged from its July projection. Nigeria had recorded a 0.36 and 2.06 per cent contraction in the first and second quarter of 2016 respectively, plummeting into its worst recession in 29 years.
The Fund said: “Sub- Saharan Africa’s largest economies continue to struggle with lower commodity revenues, weighing on growth in the region. “Nigeria’s economy is forecast to shrink 1.7 per cent in 2016, and South Africa’s will barely expand. By contrast, several of the region’s non resource exporters, including Côte d’Ivoire, Ethiopia, Kenya, and Senegal, are expected to continue to grow at a robust pace of more than 5 per cent this year.”
However, next year, world growth will accelerate to 3.4 per cent on the back of recoveries in major emerging market nations, including Russia and Brazil, the Fund said. Noting that the global economic growth will remain subdued due to a slowdown in the United States and Britain’s vote to leave the European Union, the IMF forecasts a slight pickup in 2017 and beyond, driven mainly by emerging market strength.
“Taken as a whole, the world economy has moved sideways,” said IMF chief economist and economic counsellor, Maurice Obstfeld. “We have slightly marked down 2016 growth prospects for advanced economies while marking up those in the rest of the world.”
The report highlighted the precarious nature of the recovery eight years after the global financial crisis. It raised the spectre that persistent stagnation, particularly in advanced economies, could further fuel populist calls for restrictions on trade and immigration. Obstfeld said such restrictions would hamper productivity, growth, and innovation. “It is vitally important to defend the prospects for increasing trade integration,” Obstfeld said.
“Turning back the clock on trade can only deepen and prolong the world economy’s current doldrums.” To support growth in the near term, the central banks in advanced economies should maintain easy monetary policies, the IMF said. But monetary policy alone won’t restore vigour to economies dogged by slowing productivity growth and aging populations, according to the new report.
Where possible, governments should spend more on education, technology and infrastructure to expand productive capacity while taking steps to alleviate inequality. Many countries also need to counteract waning potential growth through structural reforms to boost labour force participation, better match skills to jobs, and reduce barriers to market entry, he said. Advanced economies, the Fund said, will expand just 1.6 per cent in 2016, less than last year’s 2.1 per cent pace and down from the July forecast of 1.8 per cent.
The IMF marked down its forecast for the United States this year to 1.6 per cent, from 2.2 per cent in July, following a disappointing first half caused by weak business investment and diminishing pace of stockpiles of goods
. U.S. growth is likely to pick up to 2.2 per cent next year as the drag from lower energy prices and dollar strength fades. “Further increases in the Federal Reserve’s policy rate should be gradual and tied to clear signs that wages and prices are firming durably,” the IMF said. Uncertainty following the “Brexit’’ referendum in June will take a toll on the confidence of investors. UK growth is predicted to slow to 1.8 per cent this year and to 1.1 per cent in 2017, down from 2.2 per cent last year. The euro area will expand 1.7 per cent this year and 1.5 per cent next year, compared with 2.0 per cent growth in 2015.
“The European Central Bank should maintain its current appropriately accommodative stance,” the IMF said. “Additional easing through expanded asset purchases may be needed if inflation fails to pick up.” Growth in Japan, the world’s number three economy, is expected to remain subdued at 0.5 per cent this year and 0.6 per cent in 2017.
In the near term, government spending and easy monetary policy will support growth; in the medium term, a shrinking population will hamper Japan’s economy.
In emerging market and developing economies, growth will accelerate for the first time in six years, to 4.2 per cent, slightly higher than the July forecast of 4.1 per cent. Next year, emerging economies are expected to grow 4.6 per cent.
However, prospects differ sharply across countries and regions. In China, policy makers will continue to shift the economy away from its reliance on investment and industry toward consumption and services, a policy that is expected to slow growth in the short term while building the foundations for a more sustainable long-term expansion.
Still, China’s government should take steps to rein in credit that is “increasing at a dangerous pace” and cut off support to unviable state-owned enterprises, “accepting the associated slower GDP growth” the IMF said.
China’s economy, the world’s second largest, is forecast to expand 6.6 per cent this year and 6.2 per cent in 2017, down from growth of 6.9 percent last year. Growth emerging in Asia, and especially India, continues to be resilient. India’s gross domestic product is projected to expand 7.6 per cent this year and next, the fastest pace among the world’s major economies.
The IMF urged India to continue reform of its tax system and eliminate subsidies to provide more resources for investments in infrastructure, education and health care. Economic activity slowed in Latin America, as several countries are mired in recession, with recovery expected to take hold in 2017.
Venezuela’s output is forecast to plunge 10 per cent this year and shrink another 4.5 per cent in 2017. Brazil will see a contraction of 3.3 per cent this year, but is expected to grow at 0.5 per cent in 2017.