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2023: A Year of Imponderables and Uncertainties
In 2023, at least six OECD countries and three SSA countries will hold pivotal elections. Nigeria, the giant of Africa, the world’s sixth-largest producer of crude oil and the ninth largest holder of proven gas reserves, is one of them. The country’s election is in four days!
Elections aside, the war in Ukraine is now going into overdrive, and COVID is almost behind us. What kind of economic horizon are we looking at in 2023? And how do we thrive in a world of chaos, uncertainty, and unknown unknowns? These are some of the macroeconomic questions that make us refer to 2023 as the year of imponderables and uncertainties.
To this end, the FDC economic think tank took on the tumultuous task of a scenario-based prediction for priority macroeconomic indicators (growth and inflation) for the global, regional (SSA) and Nigerian economy.
Our conclusions are simple.
Global growth will slow, while energy prices will heavily induce inflation. Worthy of note is the impact of the 2024 U.S. presidential elections on the price of oil. It is seemingly too early to tell how much of an impact the elections will have in 2023. However, empirical evidence shows an inverse correlation between inflation and the favourability of the White House electoral outcome for the incumbent.
Therefore, if there is a likely rematch of a Trump VS Biden race, team Biden will do everything to force the global price of oil below $70pb, possibly bringing the global price of gasoline below $4 per gallon.
In SSA, growth rates will stay sluggish; inflation will be rabid, poverty will worsen, and the cost-of-living crisis will escalate, while debt levels will remain unsustainable, with many countries seeking bailouts.
Finally for Nigeria, our high-risk scenario (worst case), predicts political unrest stemming from the high-tensioned elections. The impact? A further decline in growth to 1.35% in 2023, with a contraction of 3% in Q1’23.
Nigeria is now on a precipice and appears to have hit a brick wall. Policy reforms have become inevitable with tepid growth, limited fiscal headroom, a misaligned currency, spiralling inflation, and macroeconomic imbalances. The nation now has limited options.
In this edition of the economic outlook, the FDC Think Tank shares its 2023 outlook for the world, SSA and Nigeria.
Enjoy your read!!!
