Covid-19 Dampens Global Growth Prospects

The International Monetary Fund (IMF) and the World Bank held 2020 spring meetings this week, the first virtual spring gathering in light of the current pandemic. This year’s meeting included briefings on global and regional economic outlook, especially in the context of the COVID-19 pandemic. This week we review global and Nigeria’s growth prospects in the face of the public health and economic crises caused by COVID-19.

Global Growth Projected to Contract by 3.0% in 2020
From a 2.9% global economy expansion in 2019, we had expected softening US and China trade tensions to support global growth in 2020. However, in the light of the unprecedented outbreak of COVID-19, the IMF projects a 3.0% contraction in global growth in its April 2020 World Economic Outlook from the +3.3% forecast in January 2020. The weaker growth prospect is driven by the impact of the measures taken by countries to slow the spread of COVID-19. These include economic lockdown, disruption of global supply chains, plummeting external demand and a fall in commodity prices. In response, several historic and unprecedented monetary and fiscal policy measures have been deployed by countries and multilateral institutions to mitigate the impact of COVID-19 and ease tensions in the financial markets.

Despite these measures, the IMF anticipates a global economic downturn in 2020 as the impact of the pandemic would remain far-reaching. In advanced economies, growth is projected to contract by 6.1% from +1.7% in 2019, while Emerging and Developing Economies (EMDEs) are expected to see a slower contraction at -1.0% from +3.7% in 2019. Latin America & the Caribbean are projected to be the hardest hit among EMDEs, with growth anticipated to contract by 5.2% from +0.1% in 2019. In Sub-Saharan Africa (SSA), growth is expected to contract to -1.6% from +3.1% in 2019 while only Emerging and Developing Asia is estimated to grow slightly by 1.0% from +5.5% in 2019. Away from 2020, global growth is anticipated to recover to +5.8% in 2021, driven by stronger momentum in EMDEs. 

Nigeria’s Real GDP Growth Downgraded to -3.4% in 2020
Earlier in the year, the IMF forecasted a 2.0% growth in Nigeria in 2020, following the institution’s Article IV Consultation. However, in light of increased external and domestic pressures following COVID-19, the IMF revised its 2020 growth forecast for Nigeria to a -3.4% from 2.0%. The general theme remains the high level uncertainty surrounding the pandemic as well as low oil prices. The lockdown in major states is expected to significantly affect economic activities in Nigeria. To fight this pandemic, the IMF recommends leveraging on emergency funding to support healthcare spending and provide social protection.