At the recently concluded IMF/World Bank meeting in Washington DC, IMF trimmed its growth forecast for the global economy to 3.0% (from the earlier forecast of 3.3% in April), the slowest pace since the global financial crisis over a decade ago. Although the IMF projected a modest improvement in global growth to 3.4% in 2020, it noted that the recovery is not broad-based, hence it remains precarious.
According to the Fund, the global economy is in a synchronized slowdown and growth continues to be weakened by rising trade barriers and increasing geopolitical tensions. IMF estimates that the lingering US-China trade tensions will cumulatively reduce the rate of global GDP growth by 0.8% by 2020.
Asides trade disputes between U.S and China, IMF highlighted that growth is also being weighed down by country-specific factors in several emerging market economies and by structural forces, such as low productivity and aging demographics in advanced economies. Growth in emerging market and developing economies was revised down to 3.9% for 2019 (compared to 4.5% recorded in 2018) owing in part to trade and domestic policy uncertainties, amidst a structural slowdown in China.
In view of elevated trade and geopolitical tensions, including Brexit-related risks, which could further disrupt economic activities, and derail an already fragile recovery in emerging market economies, IMF called on policymakers to undo the trade barriers put in place with durable agreements, rein in geopolitical tensions, and reduce domestic policy uncertainty.
In ameliorating the risks to growth and boosting potential output, the Fund also cited the need for fiscal authorities to step up their efforts in complementing the efforts of the monetary authorities as monetary policy cannot be the only game in town. Furthermore, countries were urged to undertake structural reforms to boost productivity, improve resilience, and lower inequality.
The warnings and recommendations of IMF should be a wake up call for the Nigerian government to implement structural reforms that will eliminate obstacles to the efficient production of goods and services, enhance productivity and stimulate private sector investment.