The International Monetary Fund (IMF) has predicted that Nigerian economy would contrast by -5.4 percent in 2020, but it predicts marginal recovery for 2021 at 2.6 percent.
IMF chief economist and director of the research department, Ms Gita Gopinath, while speaking in a virtual press conference on the latest World Economic Outlook (WEO) released yesterday in Washington DC, said the rate was an adjustment from its previous projection which forecasted the economy to decline at -3.4 per cent which it released in its last report two months ago.
According to her, the IMF projection for sub Saharan Africa overall is -3.2 percent in 2020 with recovery in 2021 at 3.4 percent so this is a significant downward revision and we have some very large negative growth forecast for instance, South Africa is -8percent and for Nigeria, it is -5.4 percent growth.
“These economies are being hit very hard and we should also keep in mind that it is not also the reduction of the growth rate, but for many countries that are starting out at lower per capita income levels, when you have a growth hit of even of even 3 or 4 percent point the distress that it causes to people lives is in order of magnitude bigger than a similar decline for say an advanced economy.
The report states that emerging market and developing economies domestic disruptions is projected closer to the downside scenario envisaged in April, more than offsetting the improvement in financial market sentiment.
It states: “The downgrade also reflects larger spillovers from weaker external demand. The downward revision to growth prospects for emerging market and developing economies over 2020–21 (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 percent in 2020, 2 percentage points below the April 2020 WEO forecast. Growth among low-income developing countries is projected at –1.0 percent in 2020, some 1.4 percentage points below the April 2020 WEO forecast, although with differences across individual countries. Excluding a few large frontier economies, the remaining group of low-income developing countries is projected to contract by –2.2 percent in 2020.
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“For the first time, all regions are projected to experience negative growth in 2020. 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.”
It further stated that fiscal responses have seen an increase in government debts across all emerging economies. “In emerging market economies, the average fiscal response to the pandemic is now estimated at 5 percent of GDP, sizable but less than in advanced economies. Yet fiscal deficits are projected to widen sharply to 101⁄2 percent of GDP on average in 2020, more than double the level last year.
“This reflects the fiscal expansion, steep output contraction, lower commodity revenues, and higher external borrowing costs, as global financial conditions remain tighter than they were before the crisis despite recent easing.”
“Government debt is now projected to average 63 percent of GDP in 2020, continuing its upward trend with a 10 percentage point surge from a year ago.”
“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 percent 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 percent of GDP, while Ethiopia has expanded its in-kind provision of food and shelter 1.8 percent of GDP. Support measures in Vietnam have included cash transfers to the poor and higher benefits in existing social protection programs (1.2 percent of GDP).
“As a result, the headline deficit for low-income developing countries is projected to widen to 6 percent of GDP in 2020, 2 percentage points higher than last year, and much higher for oil exporters. Within the group, many countries have requested a suspension of official bilateral debt repayment under the G20 Debt Service Suspension Initiative, and 45 countries have sought IMF emergency financing. While these provide temporary relief, elevated public debt exceeding 48 percent of GDP on average during 2020 to 2021 has raised sustainability concerns in many countries.”