Global and country-level macroeconomic updates by multilateral institutions continued this week during the spring meetings of the World Bank and the International Monetary Fund (IMF). We had analysed the IMF’s report on the Nigerian economy last week, highlighting economic projections and critical reform areas. This week we review global growth prospects and the World Bank’s Bi-Annual Update on the Nigerian economy.
Global Growth Forecast Revised Downwards to 3.3% in 2019
In the recently published April 2019 World Economic Outlook (WEO), we saw a third consecutive downward revision to global growth to 3.3% from 3.6% in January 2019. One year ago, the IMF had expected global growth to increase to 3.9% in 2018 and 2019. However, this underperformed projections as growth slowed to 3.6% in 2018 due to trade concerns and tighter financial conditions as interest rates increased in advanced economies. In 2019, diverse risks to global growth are moderating. Monetary policy is now more accommodative in advanced economies, supporting positive sentiments in financial markets and macroeconomic stability in emerging and frontier economies. Similarly, trade tensions are easing as the US and China ceasefire has lasted 3 months, with the conduct of ongoing trade negotiations fueling optimism of a deal. But despite an improving outlook, these concerns are expected to weigh on growth. In advanced economies, growth is projected to slow to 1.8% from 2.2% in 2018, while Emerging and Developing Economies (EMDEs) are projected to see a slight moderation in growth to 4.4% from 4.5% in 2018. The fast-paced expansion in growth among regions is expected to occur in Sub-Saharan Africa and Latin America & the Caribbean. In SSA, growth is expected to increase to 3.5% from 3.0% in 2018 while an increase to 1.4% from 1.0% is expected in Latin America & the Caribbean. However, given that their share of GDP is 8.0%, the impact on global growth is unsurprisingly expected to be mute. Beyond 2019, global growth is expected to recover to 3.6% in 2020, driven by stronger momentum in EMDEs.
Nigeria’s Short to Medium-Term Economic Outlook Downbeat
The latest World Bank update on Nigeria is mostly consistent with the IMF’s consultation on Nigeria. The general theme is one of weak economic momentum over the medium-term, where growth is projected to be below potential, long-term trend and population growth. This has been attributed to weak macroeconomic framework, policy uncertainty and the slow pace of structural reforms in the economy. Some of the issues highlighted are inadequate monetary and fiscal policies which constrain private sector activity, unsustainable fiscal position due to high deficits, a poor business environment, low credit to the private sector and vulnerability to domestic and external shocks. The World Bank suggests a strengthening of fiscal buffers, an alignment of exchange rates and a phasing out of electricity and fuel subsidies as ways to enable growth. Also, the World Bank noted that incentivising private sector funding of investment in human and physical capital is necessary given the limited scope for capital spending by the FG.