The International Monetary Fund (IMF) on Wednesday said the Nigerian economy will contract by 5.4 per cent in 2020.
The Chief Economist and Director of the Research Department at the organisation, Gita Gopinath, announced the projection during an online press conference on the latest World Economic Outlook (WEO) Wednesday.
The new projection, the IMF said, is lower than the 3.4 per cent negative growth it had estimated for the country in April.
Speaking on the latest outlook for Nigeria, Ms Gopinath said the projection for sub Saharan Africa overall is -3.2 per cent in 2020 with recovery in 2021 at 3.4 per cent.
“So, this is a significant downward revision and we have some very large negative growth forecast for instance; South Africa is -8 per cent and for Nigeria, it is -5.4 per cent growth,” she said.
The IMF said growth projection in some other emerging and developing economies were also revised downward.
She said: “The downgrade also reflects larger spillovers from weaker external demand. The downward revision to growth prospects for emerging market and developing economies over 2020–2021 (2.8 percentage points) exceeds the revision for advanced economies (1.8 percentage points).
“Excluding China, the downward revision for emerging market and developing economies over 2020–21 is 3.6 percentage points.
“Overall, growth in the group of emerging market and developing economies is forecast at –3.0 per cent in 2020, two percentage points below the April 2020 WEO forecast. Growth among low-income developing countries is projected at –1.0 per cent in 2020, some 1.4 percentage points below the April 2020 WEO forecast, although with differences across individual countries.”
The IMF official explained that excluding a few large frontier economies, the remaining group of low-income developing countries is projected to contract by –2.2 per cent in 2020.
“For the first time, all regions are projected to experience negative growth in 2020,” she said.
“There are, however, substantial differences across individual economies, reflecting the evolution of the pandemic and the effectiveness of containment strategies; variation in economic structure (for example, dependence on severely affected sectors, such as tourism and oil); reliance on external financial flows, including remittances; and pre-crisis growth trends.”
According to the IMF, fiscal responses since the outbreak of COVID-19 have resulted in an increase in government debts across all emerging economies.
“Government debt is now projected to average 63 per cent of GDP in 2020, continuing its upward trend with a 10 percentage point surge from a year ago,” the organization noted.
“As many low-income developing countries face tight financing constraints and a less severe impact of the pandemic thus far, the fiscal response to the pandemic has been modest, at 1.2 per cent of GDP on average, and mostly through budgetary measures.
“For example, Nigeria provided tax relief for employers to retain workers and raised health care spending 0.3 per cent of GDP, while Ethiopia has expanded its in-kind provision of food and shelter 1.8 per cent of GDP.”
Meanwhile, in its projection, the IMF anticipates that by 2021, Nigeria’s GDP will grow by 2.6 per cent.
In February, the Washington-based institution announced a downward review of its 2020 growth forecast for Nigeria to two per cent from the 2.5 per cent it predicted earlier.
Led by the Senior Resident Representative and Mission Chief for Nigeria, Amine Mati, officials of the global financial institution visited Lagos and Abuja between January 29 and February 12, for discussions on Nigeria’s economy.
In its report, the IMF noted that Nigeria’s pace of economic recovery remains slow, as declining real incomes and weak investment continue to weigh on economic activity. Inflation, which it said was driven by higher food prices, had risen, marking the end of the disinflationary trend seen in 2019.
The IMF also said external vulnerabilities were increasing, reflecting a higher current account deficit and declining reserves that remain highly vulnerable to capital flow reversals even though the exchange rate has remained stable, helped by steady sales of foreign exchange in various windows.
Since the outbreak of the coronavirus, economic activities in many nations of the world have slowed amid lockdown measures put in place to contain the spread of the virus.
This has affected productivity and international trade, with attendant effect on revenue projections in many countries and, in effect, the global economy.
Earlier in its assessment of the Nigerian economy, the IMF noted that structural reforms—particularly executing the much-delayed power sector recovery plan, implementing the anti-corruption and financial inclusion strategy, and addressing infrastructure and gender gaps—remain essential to boosting inclusive growth.