IMF sees slowdown in Nigeria’s economy to 3% in 2024

By Onome Amuge.

The International Monetary Fund (IMF) has projected a decline in Nigeria’s economic growth for 2023 and 2024, to 3.2 per cent and 3.0 per cent, respectively,from 3.3 in  2022,  pressured by insecurity and oil prices which have continued to rock the economic stability of Africa’s largest economy.

The projection is contained in the IMF’s latest World Economic Outlook (WEO) Update Report for July 2023: “Near-Term Resilience, Persistent Challenges”, released earlier in the week.

The report showed that despite the arrival of a new administration which cancelled the fuel subsidy hitherto implemented by previous regimes, economic growth in the country will experience further slowdown between 2023 and 2024.

According to the IMF, Nigeria’s slow down was contrary to stronger growth prospects for emerging markets and developing economies which were projected to remain at 4.0 per cent in 2023 and accelerate to 4.1 per cent the following year.

The IMF’s forecast also placed Nigeria’s economic growth rate below sub-saharan Africa’s average of 3.5 percent for 2023 and 4.1 percent for 2024.

Under its baseline forecast, the IMF indicated that the global economic growth rate is projected to fall from 3.5 per cent in 2022 to 3.0 per cent in both 2023 and 2024. The report said though the forecast for 2023 was a 0.2 percentage points upgrade from its April projections, it remained weak by historical standards.

“The forecast for 2023–24 remains well below the historical (2000–19) annual average of 3.8 per cent.

“It is also below the historical average across broad income groups, in overall Gross Domestic Product (GDP) as well as per capita GDP terms,” it said.

The report showed that the slowdown is concentrated in advanced economies, where growth will fall from 2.7 percent in 2022 to 1.5 percent in 2023 and remain subdued at 1.4 percent in 2024. This is as the euro area, still reeling from last year’s sharp spike in gas prices caused by the war, is set to decelerate sharply.

“About 93 per cent of advanced economies are projected to have lower growth in 2023, and growth in 2024 among this group of economies is projected to remain at 1.4 per cent,” the report said.

By contrast, growth in emerging markets and developing economies is still expected to pick-up with year-on-year growth accelerating from 3.1 percent in 2022 to 4.1 percent this year and next.

The report noted that the growth outlook for emerging markets and developing economies was broadly stable for 2023 and 2024, although with notable shifts across regions.

On the other hand, the international financial institution said growth in sub-Saharan Africa is projected to decline to 3.5 per cent in 2023 before picking up to 4.1 per cent in 2024.

According to the IMF, some of the slowdown in growth reflects the spillover of harmful policies. It pointed out that the rise of geoeconomic fragmentation  with the global economy splitting into rival blocs, will most harm emerging and developing economies that are more reliant on an integrated global economy, direct investment, and technology transfers.

“Insufficient progress on the climate transition will leave poorer countries more exposed to increasingly severe climate shocks and rising temperatures, even as they account for a small fraction of global emissions,” it stated.

On all these issues, the major financial agency of the United Nations said multilateral cooperation remains the best way to ensure a safe and prosperous economy for all.

Meanwhile, the IMF projected a decline in global inflation from 8.7 per cent in 2022 to 6.8 per cent in 2023,  and 5.2 percent in 2024, with core inflation projected to decline more gradually.

It said inflation could remain high and even rise if further shocks occur, including those from an intensification of the war in Ukraine and extreme weather-related events, triggering more restrictive monetary policy.

The report also warned that financial sector turbulence could resume as markets adjust to further policy tightening by central banks.