The International Monetary Fund (IMF) in its latest World Economic Outlook (WEO) has projected Nigeria’s economy to grow by 2.7 per cent in 2022 in its first forecast since last October.
In the WEO, the IMF pointed out that “growth slows as economies grapple with supply disruptions, higher inflation, record debt and persistent uncertainty”.
The Fund cautioned emerging market and developing economies with large foreign currency borrowing and external financing to prepare for possible turbulence in financial markets by extending debt maturities as feasible and containing currency mismatches.
“Exchange rate flexibility can help with the needed macroeconomic adjustment. In some cases, foreign exchange intervention and temporary capital flow management measures may be needed to provide a monetary policy with the space to focus on domestic conditions”, said the IMF.
It disclosed that “with interest rates rising, low-income countries, of which 60 per cent are already in or at high risk of debt distress, will find it increasingly difficult to service their debts.
“The G20 Common Framework needs to be revamped to deliver more quickly on debt restructuring, and G20 creditors and private creditors should suspend debt service while the restructurings are being negotiated”.
In its estimation, the continuing global recovery faces multiple challenges as the pandemic enters its third year.
Also, the IMF projects global growth this year at 4.4 per cent, 0.5 percentage points lower than previously forecast, mainly because of downgrades for the United States and China.
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“We expect global growth to slow to 3.8 per cent in 2023. This is 0.2 percentage point higher than in the October 2021 WEO and largely reflects a pickup after current drags on growth dissipate”, the IMF added.
It noted that the rapid spread of the Omicron variant has led to renewed mobility restrictions in many countries and increased labour shortages.
It further said “Supply disruptions still weigh on activity and are contributing to higher inflation, adding to pressures from strong demand and elevated food and energy prices. Moreover, record debt and rising inflation constrain the ability of many countries to address renewed disruptions”.
The IMF’s latest World Economic Outlook, therefore, anticipates that while Omicron will weigh on activity in the first quarter of 2022, this effect will fade starting in the second quarter, stressing that “other challenges, and policy pivots, are expected to have a greater impact on the outlook”.
To address many of the difficulties facing the world economy, the IMF said it is vital to break the hold of the pandemic, stressing that this will require a global effort to ensure widespread vaccination, testing, and access to therapeutics, including the newly developed anti-viral medications.
Also, it said that supply-demand imbalances are assumed to decline over 2022 based on industry expectations of improved supply, as demand gradually rebalances from goods to services, and extraordinary policy support is withdrawn.
Moreover, energy and food prices, it added, are expected to grow at more moderate rates in 2022 according to futures markets, assuming inflation expectations remain anchored, inflation is therefore expected to subside in 2023.
The IMF stated that “even as recoveries continue, the troubling divergence in prospects across countries persists. While advanced economies are projected to return to pre-pandemic trend this year, several emerging markets and developing economies are projected to have sizeable output losses into the medium-term”.
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