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101.576 IMF cuts Nige­ria’s 2021 growth out­look to 1.7%

- From Sun­day Michael Ogwu, La­gos Business · Nigeria News · Finance · World Finances · Economics · Infectious Diseases · Social Sciences · Health Conditions · International Monetary Fund · Nigeria · Africa · World Bank · Beijing · Cairo

The In­ter­na­tional Mone­tary Fund (IMF) has cut its 2021 growth out­look for sub-Sa­ha­ran Africa’s largest econ­omy to 1.7 per cent com­pared with a June fore­cast of 2.6%.

The new out­look, which was made pub­lic yes­ter­day, at the on­go­ing vir­tual an­nual meet­ings of the IMF and World Bank makes Nige­ria the fourth-worst per­former among nations mea­sured by the IMF.

This is com­ing months af­ter the re­lease of the June 2020 World Eco­nomic Out­look (WEO) has of­fered a glimpse of how dif­fi­cult rekin­dling eco­nomic ac­tiv­ity will be while the pan­demic surges.

The IMF staff sur­vey, usu­ally pub­lished twice a year, presents the IMF staff econ­o­mists’ analy­ses of global eco­nomic de­vel­op­ments dur­ing the near and medium term.

The report noted that dur­ing May and June, as many economies ten­ta­tively re­opened from the lock­down, the global econ­omy started to climb from the depths to which it had plunged in April.

It how­ever added that, with the pan­demic spread­ing and ac­cel­er­at­ing in places, many coun­tries slowed re­open­ing, and some are re­in­stat­ing par­tial lock­downs. While the swift re­cov­ery in China has sur­prised on the up­side, the global econ­omy’s long as­cent back to pre-pan­demic lev­els of ac­tiv­ity re­mains prone to set­backs.

With the lat­est de­vel­op­ment, an­a­lysts have said Nige­ria’s econ­omy is poised to ex­pand at less than half the pace needed by banks next year to avoid a spike in un­paid loans.

The banks need the econ­omy to ac­cel­er­ate af­ter re­struc­tur­ing about 40% of loans on their books that would’ve soured and should have been booked as non­per­form­ing loans.

Di­rec­tor for sub-Sa­ha­ran African banks re­search at EFG-Her­mes, Ronak Gad­hia, said: “There’s no real sense the econ­omy will bounce back to 4% to 5% growth.

“We ex­pect banks’ credit qual­ity to re­main un­der pres­sure.”

Nige­ria’s gross do­mes­tic prod­uct will prob­a­bly shrink 4.3% for this year, the IMF said, as a lock­down to con­tain the Covid-19 out­break, lower oil prices and ram­pant dol­lar short­ages weigh on out­put. GDP last ex­panded by more than 3% in 2014.

Chief econ­o­mist at Ve­tiva Cap­i­tal, Mosope Arubayi said: “We won’t have as much money to drive the in­fra­struc­ture plans that the govern­ment in­tends to im­ple­ment to open up ac­tiv­i­ties in dif­fer­ent sec­tors of the econ­omy.

“We’re not see­ing a sit­u­a­tion whereby oil prices will be sig­nif­i­cantly stronger next year.”

Cairo-based EFG pre­dicts that Nige­ria’s GDP will in­crease by 1% to 2% in 2021, “which is very low, and doesn’t help the banks from an as­set-qual­ity per­spec­tive,” the an­a­lyst said. Earn­ings per share at Nige­rian banks could de­cline 65% this year, Gad­hia said.

 ??  ?? Head­quar­ters of the In­ter­na­tional Mone­tray Fund (IMF) in Wash­ing­ton DC, USA.
Head­quar­ters of the In­ter­na­tional Mone­tray Fund (IMF) in Wash­ing­ton DC, USA.

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