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Economy & Politics

IMF expects Nigeria’s GDP to shrink by 5.4% in 2020

IMF warns that the reductions in GDP due to COVID-19 will widen inequality.

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Kristalina Georgieva, IMF boss hints at 'synchronized slowdown' in global growth , IMF: 40% of African countries can't pay back their debts , Nigeria worse off, posts grows lower than LIDC benchmark - IMF, Measures introduced by Nigeria to ensure transparent use of the $3.4b IMF loan

The International Monetary Fund (IMF) has announced that the Nigerian economy would witness a deeper contraction of 5.4% and not the 3.4% it projected in April 2020. But the global lender expects Nigeria’s economy to rebound by 2.6% in 2021. 

IMF says the forecast is influenced by the larger than expected storms to global value chains due to the coronavirus, affecting global demand for goods and services. 

The IMF expects poorer nations dealing with the disease to have longer economic recoveries as lockdowns continue in the worst-hit to global GDP since the Great Depression. 

Gita Gopinath, IMF Chief Economist said: “our projection for sub-Saharan Africa overall is a negative 3.2 % in 2020 with a recovery in 2021 of 3.4%.” 

READ MORE: IMF list unpopular policies CBN must reverse

South Africa’s economy is expected to decline by 8% in 2020 and a 3.5% rebound forecasted for 2021. 

IMF says the higher than expected GDP decline is a sign that poorer economies are being hit harder because,  “for many countries that are staring out at lower per capita income levels when you have a growth hit of 3 percentage points, the distress that it causes in peoples lives is in a bigger magnitude than a similar decline for an advanced economy so these are very difficult times.” 

“With the relentless spread of the pandemic, prospects of long-lasting negative consequences for livelihoods, job security and inequality have grown more daunting,” IMF said in its revised World Economic Outlook. 

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The rebound of equity markets globally “appears disconnected from shifts in underlying economic prospects”. The fund expects reduced consumption due to larger than expected disruptions to domestic appetite for goods and services due to social distancing measures for COVID-19. 

Chief Economist, Gita Gopinath said last month that the global outlooks are worse than previously expected and the fund may downgrade its April forecasts based on data its computing. 

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Fiscal Monetary Policies seem to have eased in first world nations and emerging economies. 

Globally, Central Banks have announced stimulus plans up to $11 trillion, which is $3 trillion higher than April estimates. These plans are expected to soften the effects on the declining economic activity and limited the rising borrowing costs, also emerging markets portfolios have seen a recovery from earlier withdrawals. 

The fund says the reduced global GDP could “tip some economies into debt crises and slow activity further”. 

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The US GDP is set to take an 8% hit in 2020, compared to 5.9% earlier predicted,  2021 growth forecast is pegged at 4.5%. The Euro Area is expected to shrink by 10.2% in 2020 and grow 6% in 2021. 

Emerging Markets are expected to shrink by 3% while advanced economies by 8%, compared to 6.1% previously predicted. 

China will see a little growth as it’s expected to grow by just 1%. Brazil is expected to shrink 9.1%, Mexico by 10.5% and India by 4.5%. 

IMF warns that the reductions in GDP due to COVID-19 will widen inequality, with over 90% of emerging market economies expected to have per capita income declines. 

Global trade for goods and services will also shrink by 11.9% this year. 

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The group expects 2 possible scenarios, first a possible second virus outbreak next year which will disrupt economic activity to about half the value expected for this year, emerging economies are expected to feel the heat more and global outlook will be 4.9% lower than 2021 forecasts. 

The other scenario predicts a faster than expected economic rebound with global forecasts 3% higher than 2021 expectations. 

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Economy & Politics

Insecurity: FG to implement town hall meetings to reach a national consensus

The meetings are set to address the twin issues of insecurity and its concomitant effect on national unity and cohesion.

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Insecurity: FG to implement town hall meetings to reach a national consensus

The Federal Government announced the launch of town hall meetings to address the twin issues of insecurity and its concomitant effect on national unity and cohesion.

This was disclosed by the Minister of Information, Lai Mohammed, at the Town Hall Meeting in Kaduna on Thursday, themed “Setting Benchmarks for Enhanced Security and National Unity in Nigeria.”

What the Minister is saying

“The correct starting point towards addressing these myriads of problems is the building of an “elite consensus” on the security, unity, indissolubility, and peaceful existence of Nigeria.

“Such elite consensus had worked in the past. Can we make it work now and proffer solutions in order to stave off the threats to our unity as a nation?” he said.

The Minister disclosed that the meetings are necessary to bring all critical stakeholders together to deliberate on the issues and possibly reach a consensus on the way forward.

“We expect this Town Hall meeting to develop concrete, implementable resolutions because a lot of talks and postulations had taken place with little or no requisite outcome.”

In case you missed it 

  • Former Vice President, Atiku Abubakar warned that the rising insecurity in Nigeria is a result of rising youth unemployment. He urged Nigeria to tackle out-of-school children cases, pay a monthly stipend to poorer families, incorporate youths who are above school age into massive public works programmes and others.
  • Senator Ali Ndume insisted that the Federal Government needs to increase its total military spending to be able to tackle the rising insecurity in Nigeria which has seen a number of school students in 2021 kidnapped by bandits.

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Business

IMF lifts 2021 global GDP growth to 6%

The group also warned that economic recoveries are diverging dangerously across and within countries.

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Kristalina Georgieva, IMF boss hints at 'synchronized slowdown' in global growth , IMF: 40% of African countries can't pay back their debts , Nigeria worse off, posts grows lower than LIDC benchmark - IMF, Measures introduced by Nigeria to ensure transparent use of the $3.4b IMF loan

The International Monetary Fund has lifted its global growth outlook to 6% in 2021 (0.5% point upgrade) and 4.4% in 2022 (0.2 percentage point upgrade), after an estimated historic contraction of -3.3% in 2020 due to the effects of the COVID-19 pandemic. This disclosure was made on the organisation’s website on Tuesday.

The group also warned that economic recoveries are diverging dangerously across and within countries, as economies with slower vaccine rollout, more limited policy support, and more reliance on tourism do less well.

READ: Corruption erodes the constituency for aid programmes and humanitarian relief – IMF

What the IMF is saying

“The upgrades in global growth for 2021 and 2022 are mainly due to upgrades for advanced economies, particularly to a sizeable upgrade for the United States (1.3 percentage points) that is expected to grow at 6.4 percent this year.

This makes the United States the only large economy projected to surpass the level of GDP it was forecast to have in 2022 in the absence of this pandemic.

China is projected to grow this year at 8.4 percent. While China’s economy had already returned to pre-pandemic GDP in 2020, many other countries are not expected to do so until 2023.”

READ: Nigeria needs structural and monetary policy reforms to unlock potential – IMF

On divergent recoveries 

The IMF stated that divergent recovery paths are likely to create wider gaps in living standards across countries compared to pre-pandemic expectations.

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“The average annual loss in per capita GDP over 2020–24, relative to pre-pandemic forecasts, is projected to be 5.7 percent in low-income countries and 4.7 percent in emerging markets, while in advanced economies the losses are expected to be smaller at 2.3 percent,” they said.

“Faster progress with vaccinations can uplift the forecast, while a more prolonged pandemic with virus variants that evade vaccines can lead to a sharp downgrade. Multispeed recoveries could pose financial risks if interest rates in the United States rise further in unexpected ways.

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For Africa, IMF forecasts economic growth of 3.4% in 2021 and 4% by 2022, Nigeria is expected to grow by 2.5% in 2021 and 2.3% by 2022, while South Africa is projected to hit growths of 3.1% and 2.0% for the respective years in focus.

READ: The 4th industrial revolution and the birth of a new international monetary system

In case you missed it 

The International Monetary Fund (IMF)  identified some factors that hamper the economic recovery of low-income countries from the devastating impact of the coronavirus pandemic, factors including access to vaccines, limited policy space to respond to the crisis, the lack of means for extra spending, pre-existing vulnerabilities such as high levels of public debt in many low-income countries and sometimes weak, negative, total factor productivity performance in some low-income countries. These factors continue to act as a drag on growth.

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