IMF forecasts further economic decline for Nigeria, others

The International Monetary Fund (IMF) has forecast a further decline in the economic growth of Nigeria and other African countries to 1.4 per cent.

Speaking during the just concluded World Bank/International Monetary Fund annual meetings in Washington, the Director for the African Department, Mr. Abebe Aemro Selassie, said the Fund saw a decline from the 3.5 per cent earlier projected for the continent to 1.4 per cent.

Selassie, who noted that Africa had enjoyed a growth rate of 5 per cent between 2010 and 2014, blamed two factors for the slowed growth.

His words, “Two broad factors explain this development. The external environment facing the region has deteriorated. Notably, commodity prices, of course, but also financial market conditions have tightened. The policy response in many of the countries that have been mostly affected by these shocks has also been delayed and unfortunately, incomplete, raising uncertainty, deterring private investment and stifling new sources of growth.”

Selassie also said, “It is, however, the commodity exporters that are under severe economic strain. This is particularly the case for oil exporters, notably, Angola and Nigeria and five of the six countries in the central African monetary — economic and monetary union. The near-term prospects have worsened significantly in recent months. In these countries, the pain is spreading from the oil sector to the non-oil part of the economy.”

He added, “Conditions are also particularly difficult in South Africa at the moment, another country which relies, to a significant degree, on commodity exports… There are, of course, also, as you may know, challenges. With these challenges are compounded in some countries by acute drought.”

He then called for adjustment of efforts in the countries affected by a crash in commodity prices.

His words, “What then are the policies called for at this juncture? The hardest hit countries, especially oil exporters, need to act promptly as the adverse external environment that they’re facing is set to endure and existing buffers have been exhausted.

“In these countries, growth rebound will require a sustained adjustment effort based on a comprehensive and internally coherent, consistent set of policies to re-establish macro stability. This implies allowing exchange rates to fully absorb the external pressures that those countries, particularly those outside monetary unions, are facing, coupled with strong and orderly adjustment to contain fiscal deficits and a tight monetary stance focused on containing inflation.”

He pointed out that, “Adoption of a comprehensive and internally coherent set of policies we think would allow a much more orderly adjustment process and facilitate a quicker growth recovery. Indeed, if this adjustment is anchored in a credible medium-term framework and is supported by concessional financing, the place of adjustment can be made more gradual attenuating the near-term growth impact significantly.”

Selassie added that, “There is a need to strike a better balance between increased investment spending needs and debt sustainability considerations. In this respect, we’re strongly advocating reforms aimed at increasing revenue mobilization which will be particularly helpful, of course, by containing fiscal deficits while sustaining increased investments.”

He, however, cautioned against extreme pessimism about the fate of the continent as some countries currently enjoy robust economy.

He said, “In particular, close to half the countries in the region — about 19 out of 45 odd countries in Sub-Saharan Africa continue to enjoy robust growth, including the likes of Côte d’Ivoire, Ethiopia, Senegal, and Tanzania with economic output set to expand by 6 percent or more by this year.”