IMF revises down Nigeria’s 2021 growth forecast by 0.2%

The International Monetary Fund (IMF) has revised its growth forecast for the Nigerian economy in 2021 to 1.5 per cent from its earlier projection of 1.7 percent.

The IMF made the new projection known in its World Economic Outlook (WEO) update released on Tuesday.

The new growth projection is 0.2 per cent lower than the multilateral institution’s 2021 forecast made public last year.

The IMF, however, projected that in sub-Saharan Africa, growth will strengthen to 3.2 per cent in 2021 and 3.9 per cent in 2022.

The new report, titled ‘Policy Support and Vaccines Expected to Lift Activity,’ said even though the recent vaccine approvals have raised hopes of a turnaround in the pandemic later this year, renewed waves and new variants of the virus pose concerns for the outlook.

“Amid exceptional uncertainty, the global economy is projected to grow 5.5 percent in 2021 and 4.2 percent in 2022,” it said.

“The 2021 forecast is revised up 0.3 percentage point relative to the previous forecast, reflecting expectations of a vaccine-powered strengthening of activity later in the year and additional policy support in a few large economies.

“The projected growth recovery this year follows a severe collapse in 2020 that has had acute adverse impacts on women, youth, the poor, the informally employed, and those who work in contact-intensive sectors. The global growth contraction for 2020 is estimated at -3.5 percent, 0.9 percentage point higher than projected in the previous forecast (reflecting stronger-than-expected momentum in the second half of 2020).”

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The IMF noted that the strength of the recovery is projected to vary significantly across countries, depending on access to medical interventions, effectiveness of policy support, exposure to cross-country spillovers, and structural characteristics entering the crisis.

Outlook on Poverty

In its new report, the multilateral institution said close to 90 million people are likely to fall below the extreme poverty threshold during 2020–21.

“Across regions, vulnerabilities, economic structure, and pre-crisis growth trends, together with the severity of the pandemic and the size of the policy response to combat the fallout, shape recovery profiles,” it said.

The IMF said emerging markets and developing economies are projected to trace diverging recovery paths. Oil exporters like Nigeria and tourism-based economies within the group face particularly difficult prospects considering the expected slow normalization of cross-border travel and the subdued outlook for oil prices.

Last October, the IMF said the coronavirus pandemic is expected to reverse the progress made in poverty reduction across the past two decades.

In its new report, IMF noted that policy actions should ensure effective support until the recovery is firmly underway, with an emphasis on advancing key imperatives of raising potential output and ensuring participatory growth that benefits all.