IMF cuts forecast for Nigeria, South Africa, others
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