International financial organisations, the World Bank and International Monetary Fund (IMF), have reviewed Nigeria’s economic growth projection for this year to 2.1 percent, down from 2.2 percent forecast predicted last October.
The new prediction, which represents a 0.1 percentage point difference, is contained in the April 2019 edition of Africa’s Pulse, the bank’s periodical analysis of the state of African economies. While the Fund made the disclosure in its revised new World Economic Outlook for the year, released at the 2019 Spring IMF/ World Bank Meetings in Washington.
On its part, the bank cited stagnant oil production, high inflation and policy distortions as reasons for the cut in projection. “This modest expansion reflects stagnant oil production, as regulatory uncertainty limits investment in the oil sector, while non-oil economic activity is held back by high inflation, policy distortions, and infrastructure constraints,” the report stated.
Whereas, the IMF warned against compounding more debts, particularly nations with high debt stock, among which is Nigeria – the country’s debt has risen from about N11 trillion in the last five years to a new high of N24 trillion as at end of December last year.
According to the World Bank, improving financing conditions will help boost investment as the economy’s growth is projected to rise slightly to 2.2 percent in 2020 and reach 2.4 percent in 2021.
Sub-Saharan growth estimates lowered
Both international organisations also cut their growth estimates for sub-Saharan Africa.
IMF’s new revised outlook said the prospect for the region is surrounded by “significant downside risks, particularly considering the elevated policy uncertainty in the global economy.”
Due to slower growth in three of its biggest economies, the World Bank estimates the region’s economy to recover at a slower rate of 2.8 percent in 2019 and 3.3 percent in 2020. Meanwhile, the Fund cut its projection for the region this year to 3.5 percent, from 3.8 percent set the last time, on the heels of the downgrade by the World Bank.
“This upturn is supported, on the demand side, by exports and private consumption and, on the supply side, by a rebound in agriculture, an increase in mining production, and steady growth in the services sector in some countries,” the bank’s report revealed.
The projections represent 0.5 and 0.3 percentage points lower than last October’s forecasts, respectively. It reflects slower growth in Nigeria and Angola, due to challenges in the oil sector, and subdued investment growth in South Africa, due to low business confidence.
Albeit, as activity strengthens in the region’s three largest economies, regional growth is expected to improve slightly to 3.4 percent in 2021, according to the bank.
Challenges from the external environment
Although commodity prices improved in the first quarter of 2019, they are below their peak in 2018 and the oil market outlook remains highly uncertain, the bank further said. This puts real pressure on developing economies of the sub-Saharan countries even as global growth continues to decelerate.
“Global growth is set to moderate in the near term, then pick up modestly. As a result of these developments, global growth is now projected to slow from 3.6 percent in 2018 to 3.3 percent in 2019, before returning to 3.6 per cent in 2020,” IMF said.
The Fund explained that the revised growth projection followed a mix of factors, which aﬀected major economies, such as China’s growth decline and an increase in trade tensions with the United States. Also, the Euro area economy lost more momentum than expected as consumer and business conﬁdence weakened.
With the global economy seeing international trade and manufacturing activity reduce, and trade tensions elevated, emerging markets are experiencing substantial financial market pressures.
The World Bank in January had projected that global economic growth will soften from a downwardly revised 3 percent in 2018 to 2.9 percent in 2019 amid rising downside risks to the outlook.
“Despite the rebound, growth in the region (sub-Sahara) will remain well below its long-term average … However, there is significant heterogeneity in growth performances, with over one-third of the countries expected to grow at more than 5 percent in 2019 to 2021,” the bank’s report added.