IMF predicts slower growth for Nigerian economy

The International Monetary Fund (IMF) has predicted a slower growth for the Nigerian economy in 2022, changing its forecast from 3.2 per cent in July to 3.0 per cent.

In its latest World Economic Outlook for October 2022 titled, “Countering the Cost-of-Living Crisis”, it projected a growth contraction for sub-Saharan Africa from 3.8 per cent to 3.6 per cent.

It cited the strength of the dollar as a major challenge tightening financial conditions, and increasing the cost of imported goods.

Nigeria is faced with the continuous fall of the Naira against the US dollar, trading at about N440 and N730 at the official and parallel market respectively.

IMF said the dollar is currently at its strongest since the early 2000s.

“Although the appreciation is most pronounced against currencies of advanced economies. So far, the rise appears mostly driven by fundamental forces such as tightening US monetary policy and the energy crisis,” it said.

“The appropriate response in most emerging and developing countries is to calibrate monetary policy to maintain price stability, while letting exchange rates adjust, conserving valuable foreign exchange reserves for when financial conditions really worsen.

“As the global economy is headed for stormy waters, now is the time for emerging market policymakers to batten down the hatches.”

The Fund also projected the global economy’s growth to slow from 6.0 per cent in 2021 to 3.2 per cent in 2022 and 2.7 percent in 2023.

It attributed this to high inflation, Russia/Ukraine war and the aftermath of COVID-19.

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“The global economy is experiencing a number of turbulent challenges. Inflation higher than seen in several decades, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook,” it said.

“Normalization of monetary and fiscal policies that delivered unprecedented support during the pandemic is cooling demand as policymakers aim to lower inflation back to target. But a growing share of economies are in a growth slowdown or outright contraction.

“The global economy’s future health rests critically on the successful calibration of monetary policy, the course of the war in Ukraine, and the possibility of further pandemic-related supply-side disruptions, for example, in China.”