IMF cuts forecast for Nige­ria, South Africa, oth­ers

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The In­ter­na­tional Mon­e­tary Fund (IMF) yesterday down­graded its forecast for global eco­nomic growth for this year and 2016, es­pe­cially for Nige­ria and some other emerg­ing economies.

The IMF had ear­lier pre­dicted a growth rate of 3.3 per cent in July for the rest of the year and 3.8 per cent for 2016. But the body, in a re­port it re­leased yesterday, re­duced those fig­ures to 3.1 per cent and 3.6 per cent re­spec­tively.

“A re­turn to ro­bust and syn­chro­nized global ex­pan­sion re­mains elu­sive,” the re­port de­clared.

The body said that “the risks of an out­come worse than its fore­casts are more pro­nounced than they were just a few months ago.”

The sharpest down­grades are for emerg­ing economies, es­pe­cially Nige­ria, Brazil, South Africa and Rus­sia. Though the IMF is still pre­dict­ing growth, it made it clear “the growth is dis­tinctly lack­lus­tre”, es­pe­cially for the cur­rent year.

The de­vel­oped economies are ex­pected to man­age slightly stronger growth than be­fore, re­flect­ing the mod­est re­cov­ery in the eu­ro­zone and the re­turn of growth in Ja­pan, though the re­port de­scribed such growth as “ten­ta­tive, at best.”

The global fi­nance body said emerg­ing and de­vel­op­ing economies still ac­count for what it called the “lion’s share of global growth,” but main­tained such economies are slow­ing, in 2015, for the fifth con­sec­u­tive year.

It ex­plained China’s eco­nomic tran­si­tion as an im­por­tant fac­tor in the cur­rent de­vel­op­ment and de­scribed the Chi­nese econ­omy as mov­ing from a very rapid growth driven by in­vest­ment and in­dus­trial ex­ports to mod­er­ate ex­pan­sion, based to a greater ex­tent on Chi­nese con­sumer spend­ing in­creas­ingly on ser­vices.

The IMF em­pha­sised that shift as one di­rect fac­tor be­hind the emerg­ing world slow­down. “Oil pro­duc­ers have been hit by the de­cline in the price of their ex­ports. Nige­ria and Rus­sia are strik­ing ex­am­ples. China’s slow­down is one of the un­der­ly­ing forces, along with abun­dant sup­plies of crude oil,” the re­port said.

It pointed at in­creased debts in the emerg­ing economies, lower com­mod­ity prices and slower growth as fac­tors that could un­der­mine their fi­nan­cial sta­bil­ity, which could in turn hit wider eco­nomic per­for­mance. These are set­backs that have af­flicted the Nige­rian econ­omy in re­cent times and would be re­spon­si­ble for its in­clu­sion in the IMF re­port.

IMF also men­tioned “the pos­si­bil­ity of lower po­ten­tial growth, that is, a wide-rang­ing term for fac­tors that gov­ern the max­i­mum ca­pac­ity of an econ­omy to grow if noth­ing much goes wrong.”

Such fac­tors in­clude ak in­vest­ment and the ef­fects of of longer-term un­em­ploy­ment on work­ers’ skills, fac­tors that are also cur­rently threat­en­ing the Nige­rian econ­omy.

De­spite the down­grade, the IMF’s main forecast for 2016 is for growth to pick up “some­what” glob­ally and in the emerg­ing economies. “It’s just that it is still not all that con­vinc­ing a re­cov­ery,” it re­marked.

See anal­y­sis on page 32

IMF Pres­i­dent, Chris­tine La­garde

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