IMF downgrades Nigeria’s economic growth projection

The International Monetary Fund (IMF) has downgraded Nigeria’s economic growth projection – to decline from 3.3 per cent in 2022 to 2.9 per cent in 2023,

The Washington-based lender made this known in its “World Economic Outlook: Navigating Global Divergences” released on Tuesday.

The IMF also projected that the country’s economy would grow at 3.1 per cent in 2024, with the negative effects of high inflation on consumption taking hold.

“The forecast for 2023 is revised downward by 0.3 percentage point, reflecting weaker oil and gas production than expected, partially as a result of maintenance work,” the report said.

The IMF said global headline inflation was expected to steadily decline from its peak of 8.7 per cent in 2022 (annual average) to 6.9 per cent in 2023 and 5.8 per cent in 2024.

It said the forecast for 2024 was revised upward by 0.6 percentage points, reflecting higher-than-expected core inflation.

“On a year-over-year basis, projected global headline inflation peaked at 9.5 per cent in the third quarter of 2022 and is projected to reach 5.9 per cent by the fourth quarter of 2023 before falling to 4.8 per cent in the fourth quarter of 2024, still above the pre-pandemic (2017–19) annual average of about 3.5 per cent,” the report said.

Although the IMF said monetary tightening was starting to bear fruit, a central driver of the fall in headline inflation projected for 2023 was declining international commodity prices.

It added that nearly three-quarters of economies were expected to see lower headline inflation in 2023, but the pace of disinflation was especially pronounced for advanced economies.

These economies, the IMF said, were expected to see (annual average) inflation fall by 2.7 percentage points in 2023, about double the (1.3 percentage point) decline projected for emerging markets and developing economies.

It explained that part of this difference reflected advanced economies’ benefiting from stronger monetary policy frameworks and communications, which facilitated disinflation, but the difference also reflected lower exposure to shocks to commodity prices and exchange rates.

In low-income developing countries, the IMF said inflation was, on average, projected to be in double digits and is not expected to fall until 2024.

“There are also large differences in the expected pace of change in headline inflation across major economies, reflecting different starting points. The euro area is expected to see an especially sharp fall in (year-over-year) inflation in 2023 of 6.6 percentage points from 9.9 per cent in the fourth quarter of 2022 to 3.3 per cent in the fourth quarter of 2023, with the fall reflecting in part the decrease in energy prices,” it said.

Recall that the IMF had in April retained its growth forecast for the Nigerian economy in 2023 at 3.2 per cent.

The IMF said tentative signs in early 2023 that the world economy could achieve a soft landing with inflation coming down amid steady growth had receded due to stubbornly high inflation and recent financial sector turmoil.

The World Bank had last week announced a similar reversal in its projection of Nigeria’s economic growth from 3.3 percent to 2.9 percent. [With The Will report]