Against the backdrop of the recent drop in global crude oil prices, the International Monetary Fund said on Monday that Nigeria’s economy would expand more slowly in 2019 than previously predicted.
The IMF, in its World Economic Outlook Update, titled ‘A Weakening Global Expansion,’ revised down the country’s Gross Domestic Product projection for this year to two per cent from the 2.3 per cent projected in October 2018.
It also lowered the economic growth forecast for next year to 2.2 per cent from the 2.5 per cent it previously predicted.
The Washington-based fund said, “In sub-Saharan Africa, growth is expected to pick up from 2.9 per cent in 2018 to 3.5 per cent in 2019, and 3.6 per cent in 2020.
“For both years, the projection is 0.3 percentage point lower than last October’s projection, as softening oil prices have caused downward revisions for Angola and Nigeria.”
According to the report, the headline numbers for the region mask significant variation in performance, with over one-third of sub-Saharan economies expected to grow above five per cent in 2019–20.
The IMF downgraded its estimates for global growth for 2019 and 2020 to 3.5 per cent and 3.6 per cent respectively from 3.7 per cent each as previously predicted, warning that the expansion seen in recent years was losing momentum.
It said emerging market and developing economies had been tested by difficult external conditions over the past few months amid trade tensions, rising US interest rates, dollar appreciation, capital outflows, and volatile oil prices.
The IMF noted that in some economies, addressing high private debt burdens and balance-sheet currency and maturity mismatches would require strengthening macroprudential frameworks.
It said exchange rate flexibility could complement these policies by helping to buffer external shocks, adding, “Where inflation expectations are well anchored, monetary policy can provide support to domestic activity as needed.”
According to the report, fiscal policy should ensure debt ratios remain sustainable under the more challenging external financial conditions.
It said, “Improving the targeting of subsidies and rationalising recurrent expenditures can help preserve capital outlays needed to boost potential growth and social spending to enhance inclusion.
“For low-income developing countries, concerted efforts in these areas would also help diversify production structures (a pressing imperative for commodity-dependent economies), and their progress toward the UN Sustainable Development Goals.
Nigeria, Africa’s top oil producer, is highly dependent on crude oil for government revenues.
Average oil prices are projected at just below $60 per barrel in 2019 and 2020 (down from about $69 and $66, respectively, in the last WEO).
Early this month, the IMF announced that global debt had reached an all-time high of $184tn in nominal terms, the equivalent of 225 per cent of GDP in 2017, warning of “a legacy of excessive debt.”