From Isaac Anumihe, Abuja
International Monetary Fund (IMF) has maintained an unchanged economic growth rate of 2.5 per cent for 2021 and 2.6 per cent for 2022 in Nigeria.
According to a document obtained by Daily Sun, the upgrade in 2022, depends on the expected improvements in trade and oil production.
Also, improvements in external financial conditions are expected to increase despite the bouts of volatility.
‘It (forecast) is also predicated on continued improvements in external financial conditions, which have, despite some bouts of volatility recently, have actually been fairly supportive of growth, and it’s important that that continues in order for this growth forecast to pan out.
‘In terms of our forecast for Nigeria this year, we have maintained an unchanged forecast of 2.5 per cent. And we have upgraded slightly for 2022, to 2.6 per cent. The reason for the unchanged forecast for this year is because it’s a product of opposing developments. We saw activity, as elsewhere, respond a lot stronger than what we had expected earlier in the year. But looking out ahead, we think that the uptick in cases in the rest of the continent is going to pose a downside risk factor and is going to drag on growth going forward.
‘In terms of our upgrade for 2022, it’s related to the improvements in terms of trade. The oil production that we expect to increase going forward, will lift growth for 2022. It is also predicated on continued improvements in external financial conditions, which have, despite some bouts of volatility recently, have actually been fairly supportive of growth, and it’s important that that continues in order for this growth forecast to pan out,’ the IMF said.
IMF also noted that Nigeria has always been a beneficiary of its loans and that has majorly contributed to the outlook.
‘Nigeria has been a beneficiary of IMF funding. It accessed our emergency financing facilities last year, and that is also contributing to this outlook by alleviating some of the liquidity needs that the Nigerian economy has faced,’ it said.
As for inflations for emerging markets and developing countries, IMF said that considering a combination of factors, including their currency weakening, it concluded that interest rates will go up and inflation would be persistent.
‘What we are seeing, for several of those economies, is that because of a combination of factors, including their currency weakening, we are seeing some very high inflation readings. And several of these countries have actually started raising interest rates because of the concern that these inflation pressures could become persistent. And this is a concern. So, I would make a distinction between emerging and developing economies, and a lot of advanced economies, where again, you, in advanced economies, you watch the inflationary pressures. But in emerging and developing economies, we are seeing this show up and markets are expecting that interest rates will go up, actually, much faster than in the advanced economies,’ the international body noted.
Relating inflation to Egypt, the fund recommended a continued data-driven approach to monetary policy.
‘Now, when it comes to inflation, Egypt is a country where we are seeing inflation around 4.9 per cent if I recall the most recent numbers. And the inflation target had actually been reset to be now at about 7, with a band of 2 around it. So, then you look at it this way, actually inflation is at the lower end of the inflation and inflation band.
‘So, more generally, our recommendation is to continue the data-driven approach to monetary policy, which is something that the Central Bank has been doing over the past months,’ it said.