The International Monetary Fund (IMF) has reviewed upward the economic growth projections for Nigeria this year from 1.9 percent forecast in October 2017 to 2.1per cent in 2018.
The latest forecast, which is contained in the IMF’s World Economic Outlook Update, January 2018 released yesterday, validates the 2.1 percent growth projection for the country this year announced by the Fund on the conclusion of it’s 2018 Article IV mission to Nigeria last December.
The IMF mission had hinged its forecast on the expected full year impact of the greater availability of foreign exchange and higher oil production as the country exits recession. It, however, stated that despite the exit from recession, the Nigerian economy remained vulnerable, adding that risks to the outlook include lower oil prices, tighter external market conditions, heightened security issues, and delayed policy responses.
“Containing vulnerabilities and achieving growth rates that can make a significant dent in reducing poverty and unemployment requires a comprehensive set of policy measures. Macroeconomic and structural reforms remain urgent to contain vulnerability and support sustainable private sector-led growth,” the IMF said.
According to the Fund: “The growth pickup in Sub-Saharan Africa (from 2.7 percent in 2017 to 3.3 percent in 2018 and 3.5 percent in 2019) is broadly as anticipated in the fall, with a modest upgrade to the growth forecast for Nigeria but more subdued growth prospects in South Africa, where growth is now expected to remain below 1 percent in 2018–19,as increased political uncertainty weighs on confidence and investment.” It, however, upgraded its growth forecast for the global economy in 2018 to 3.9 percent, citing the expected impact of the recently approved U.S. tax policy changes.
The IMF stated: “Global economic activity continues to firm up. Global output is estimated to have grown by 3.7 percent in 2017, which is 0.1 percentage point faster than projected in the fall and ½ percentage point higher than in 2016.
The pickup in growth has been broad-based, with notable upside surprises in Europe and Asia. Global growth forecasts for 2018 and 2019 have been revised upward by 0.2 percentage point to 3.9 percent.
The revision reflects increased global growth momentum and the expected impact of the recently approved U.S. tax policy changes.” The tax cuts would likely widen the U.S. current account deficit, strengthen the U.S. dollar and affect international investment flows, IMF chief economist Maurice Obstfeld said.
“Political leaders and policymakers must stay mindful that the current economic momentum reflects a confluence of factors that are unlikely to last for long,” Obstfeld told reporters at the World Economic Forum in Davos.
He said economic gains from the tax cuts would be partially paid back later in the form of lower growth as temporary spending incentives, notably for investment, expired and as rising federal debt took a toll.
IMF Managing Director Christine Lagarde pointed to a “troubling” increase in debt levels across many countries and warned policymakers against complacency, saying now was the time to address structural deficiencies in their economies.
Obstfeld said a sudden rise in interest rates could lead to questions about the debt sustainability of some countries and lead to a disruptive correction in “elevated” equity prices.
The U.S. economy has been showing steady but underwhelming annual growth since the last recession in 2007-2009. The IMF now expects it to expand by 2.7 percent in 2018, much higher than the 2.3 percent the fund forecast in October. U.S. growth was projected to slow to 2.5 percent in 2019, it said.