Nigeria’s economy to contract by 3.2% as global economy shrinks by 5.2% ― World Bank

The World Bank, on Monday, projected a 3.2 per cent contraction for Nigeria’s economy even as it said that the global economy would shrink by 5.2 per cent as a result of the COVID-19 pandemic.

Tribune Online reports that the World Bank’s projection is 0.2 per cent lower than the one announced by the Federal Government in May.

Finance, Budget and National Planning Minister, Zainab Ahmed, had said in May that the government expected the economy to contract by 3.4 per cent as a consequence of the pandemic and the attendant lockdown of the economy.

The government then lowered the crude oil benchmark from $57 per barrel proposed in the 2020 budget to $25 per barrel and adjusted downward revenue estimate for the year from N8.419 trillion to N5.548 trillion.

According to the World Bank in a report entitled Pandemic, Recession: The Global Economy in Crisis, though economic activity in Sub-Saharan Africa would contract by 2.8 per cent in 2020, “The economy of Nigeria is expected to shrink by 3.2 per cent this year, given the collapse in oil prices, which represent 80 per cent of the country’s exports, about a third of banking sector credit, and half of the government revenues.”

The World Bank described the 5.2 per cent contraction to be experienced by the global economy this year as “the deepest global recession in decades,” adding that per capita incomes in most emerging and developing economies would shrink this year.

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According to the financial institution, “The COVID-19 pandemic has, with alarming speed, delivered a global economic shock of enormous magnitude, leading to steep recessions in many countries. The baseline forecast envisions a 5.2 per cent contraction in global GDP in 2020—the deepest global recession in eight decades, despite unprecedented policy support.

“Per capita incomes in the vast majority of emerging market and developing economies (EMDEs) are expected to shrink this year, tipping many millions back into poverty. The global recession would be deeper if bringing the pandemic under control took longer than expected, or if financial stress triggered cascading defaults.”

World Bank said economic activities in advanced countries would contract by 7 per cent in 2020 as domestic demand and supply, trade, and finance had been severely disrupted, the report said.

The American economy is projected to shrink by 6.1 per cent this year, while Euro Area could shrink by 9.1 per cent.

With specific reference to the Sub-Saharan Africa region, the World Bank stated that “Growth in the region is expected to rebound to 3.1 per cent in 2021; however, the outlook is subject to substantial uncertainty. The projected pick-up assumes that the pandemic will have faded by the second half of 2020, that domestic outbreaks in the region follow a similar path, and that growth in major trading partners will rebound.

“Commodity prices are also expected to recover but remain below 2019 levels. “However, the pandemic’s progression is particularly hard to predict in Sub-Saharan Africa, as the region faces significant hurdles in containing the virus. These include weak and underfunded health care systems—government per capita spending on health care is about 2 per cent of that in advanced economies—and lack of access to basic sanitation.”

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