IMF says Nigeria’s growth prospect to remain subdued at -1.7% in 2016

Sees rebound to 0.6% in 2017, but revises global growth to 3.1%

Nigeria’s overall economic growth prospect is expected to still remain subdued at -1.7 percent on account of soft oil prices and a weak currency, the International. Monetary Fund (IMF) said in its October World Economic Outlook (WEO) just released. But the IMF sees growth rebounding, albeit slowly to 0.6 percent in 2017.

The anticipated 1.7 percent contraction however shows a 0.1 percent improvement from the 1.8 negative growth forecast by the IMF earlier in July projections.

Nigerian economy slipped into recession following another contraction in Q2, 2016 as shocks associated with energy shortages and price hikes, scarcity of foreign exchange and depressed consumer demand, among others, apparently proved to be more damaging than expected.

The National Bureau of Statistics data showed domestic output in Q2, 2016 contracted by 2.06 percent,  a decline of 1.70 percentage points in output from the -0.36 per cent recorded in Q1, and 4.41 percentage points lower than the 2.35 per cent growth in the corresponding period of 2015. The non-oil sector contracted by 0.38 per cent, compared with the 0.18 per cent contraction in the preceding quarter.

The Nigerian government authorities say their strategy is to spend the country out recession in the shortest possible time and have injected up to N770 billion capital to hold massive infrastructure that would create jobs.

Experts, however think the return to growth may not happen in the immediate as further confirmed by the IMF WEO of possible growth rebound only by 2017.

In the report, the IMF notes that Sub-Saharan Africa is also expected to decelerate to 1.4 percent on account of subdued by weak commodity exporting economies like Nigeria. But the sub-region’s growth is expected to pick up by 2017 to 2.9 percent.

According to the IMF, activity has been “weakened in sub-Saharan Africa, led by Nigeria, where production was disrupted by short- ages of foreign exchange, militant activity in the Niger Delta, and electricity blackouts.”

Global growth is projected to slow to 3.1 percent in 2016 before recovering to 3.4 percent in 2017.

The forecast, revised down by 0.1 percentage point for 2016 and 2017 relative to April, reflects a more subdued outlook for advanced economies following the June U.K. vote in favor of leaving the European Union (Brexit) and weaker-than-expected growth in the United States.

These developments have put further downward pressure on global interest rates, as monetary  policy is now expected to remain accommodative for longer. Although the market reaction to the Brexit shock was reassuringly orderly, the ultimate impact remains very unclear, as the fate of institutional and trade arrangements between the United Kingdom and the European Union is uncertain.

Financial market sentiment toward emerging market economies has improved with expectations of lower interest rates in advanced economies, reduced concern about China’s near-term prospects following policy support to growth, and some firming of commodity prices.

But prospects differ sharply across countries and regions, with emerging Asia in general and India in particular showing robust growth and sub-Saharan Africa experiencing a sharp slowdown.