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Global growth under threat – IMF
The International Monetary Fund (IMF) revised its global growth forecast for 2023 downward to 2.8% from 2.9%. This is nearly half the growth rate in 2021 (6%) and the weakest since 2001, except during the 2008/09 global financial crisis.
The downward revision is hinged on record-high inflation, its attendant worldwide monetary tightening, and the lingering effect of the Russia-Ukraine war. Whether or not the IMF’s forecast is too dramatic as the financial contagion has become a fluke, we can all agree that the Fund is onto something much bigger than four bank collapses.
With each global rate hike, and there have been several in recent quarters, a contraction in private sector growth that in turn slows output growth follows. Unfortunately, developing countries like Nigeria are getting short shrift and are therefore forced to mirror this trend for a number of reasons, including protecting the naira’s peg to the US dollar and attracting investments.
While the chances of currency stability and increased investment inflows look bleak at the moment, what we do know is that it heavily imports recession jitters into Nigeria. This is because a global economic slowdown means lower oil prices amid falling oil production. It also means high borrowing costs and an eventual slowdown in economic growth. But we’ll keep our fingers crossed, watching and waiting to see how it all works. As they say, it’s not over until the fat lady sings.
Debt distress hovers around developing economies
Developing economies are fragile. Amid this fragility, they are expected to experience sustained double-digit growth, as the Asian Tigers have. But the reality couldn’t be farther from the truth, thanks to the recent global headwinds. As a result, the IMF says that over 60% of low-income countries are at high risk of or in debt distress. Since interest rates are projected to remain high till year-end, low-income countries are now confronted with an ‘impossible trade-off’ between debt and sustainable development.
In the latest edition of the bi-monthly publication, the FDC think tank analyzes these issues and their implications for the Nigerian economy.
Enjoy your read!
