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IMF downgrades Nigeria’s 2024 economic growth projection to 3%

By Clara Nwachukwu

The International Monetary Fund (IMF) has cut its forecast for Nigeria’s economic growth for 2024 to 3.0, down from 3.1% projected in October 2023, and projected to rise to 3.1% in 2025.

In its revised World Economic Outlook for 2024 and 2025 released yesterday, the IMF predicts that Sub-Saharan Africa’s economy will grow by 3.8% in 2024, and 4.1% in 2025- a 4.0% drop from its initial forecast in October 2023.

It said: “In Sub-Saharan Africa, growth is projected to rise from an estimated 3.3 per cent in 2023 to 3.8 per cent in 2024 and 4.1 per cent in 2025, as the negative effects of earlier weather shocks subside, and supply issues gradually improve.

“The downward revision for 2024 of 0.2 percentage point from October 2023 mainly reflects a weaker projection for South Africa on account of increasing logistical constraints, including those in the transportation sector, on economic activity.”

The Washington-based institution in the Outlook titled: “Moderating Inflation and Steady Growth, Open Path to Soft Landing,” also projected overall global economic growth at 3.1% in 2024 (0.2% higher than October 2023), and 3.2% in 2025.

The forecast for 2024–25 is, however, below the historical (2000–19) average of 3.8 per cent, with elevated central bank policy rates to fight inflation, a withdrawal of fiscal support amid high debt weighing on economic activity, and low underlying productivity growth.

It attributed the expected growth to expected resilience in the United States and several large emerging markets and developing economies, as well as fiscal support in China.

It added: “The forecast for 2024–25 is, however, below the historical (2000–19) average of 3.8 per cent, with elevated central bank policy rates to fight inflation, a withdrawal of fiscal support amid high debt weighing on economic activity, and low underlying productivity growth.

“Inflation is falling faster than expected in most regions, in the midst of unwinding supply-side issues and restrictive monetary policy.”

It continued: “With inflation drivers and dynamics differing across economies, policy needs for ensuring price stability are increasingly differentiated.

“At the same time, in many cases, amid rising debt and limited budgetary room to manoeuvre, and with inflation declining and economies better able to absorb effects of fiscal tightening, a renewed focus on fiscal consolidation is needed.”  

The IMF equally highlighted several downside risks, including potential spikes in commodity prices due to geopolitical shocks and global supply disruptions, which could stem from attacks by Houthis in the Red Sea or an escalation of conflicts in the Middle East.

Also, the risk of persistent inflation, which may necessitate central banks to maintain higher interest rates for extended periods.

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