.As global outlook slips to 2.9% in 2023
The International Monetary Fund (IMF) yesterday projected 3.2% economic growth for Nigeria this year, higher than the 3.0% estimated last year, but slip to 2.9% next year.
However, global growth is projected to fall from an estimated 3.4% in 2022 to 2.9% in 2023, and expected to rise to 3.1% in 2024, as the full impact of steeper central bank interest rate hikes slows demand.
The forecast for 2023 is 0.2 percentage point higher than predicted in the October 2022 World Economic Outlook (WEO) but below the historical (2000–19) average of 3.8%.
The report said the rise in central bank rates to fight inflation and Russia’s war in Ukraine continue to weigh on economic activity, just as the rapid spread of COVID-19 in China dampened growth in 2022, but the recent reopening has paved the way for a faster-than-expected recovery.
Also, Global inflation is expected to fall from 8.8% in 2022 to 6.6% in 2023 and 4.3% in 2024, still above pre-pandemic (2017–19) levels of about 3.5%.
The IMF said there were both upside and downside risks to the outlook with built-up savings creating the possibility of sustained demand growth.
With tighter monetary conditions and lower growth potentially affecting financial and debt stability, it is necessary to deploy macro-prudential tools and strengthen debt restructuring frameworks.
It continued: “The balance of risks remains tilted to the downside, but adverse risks have moderated since the October 2022 WEO.
“On the upside, a stronger boost from pent-up demand in numerous economies or a faster fall in inflation are plausible.
“On the downside, severe health outcomes in China could hold back the recovery, Russia’s war in Ukraine could escalate, and tighter global financing costs could worsen debt distress.
“Financial markets could also suddenly reprice in response to adverse inflation news, while further geopolitical fragmentation could hamper economic progress.
“In most economies, amid the cost-of-living crisis, the priority remains achieving sustained disinflation. With tighter monetary conditions and lower growth potentially affecting financial and debt stability, it is necessary to deploy macro-prudential tools and strengthen debt restructuring frameworks.”
Speaking with journalists, IMF Chief Economist, Pierre-Olivier Gourinchas, said recession risks had subsided and central banks are making progress in controlling inflation, but more work was needed to curb prices.
“We have to sort of be prepared to expect the unexpected, but it could well represent a turning point, with growth bottoming out and then inflation declining,” he said.
Gourinchas noted that while core inflation may have peaked in some countries such as the United States, central banks still need to remain vigilant and be more certain that inflation is on a downward path, particularly in countries where real interest rates remain low, such as in Europe.
“So we’re just saying, look, bring monetary policy slightly above neutral at the very least and hold it there. And then assess what’s going on with price dynamics and how the economy is responding…”
