The International Monetary Fund (IMF) has retained Nigeria’s 2.5 per cent economic growth forecast for 2021.
The institution said this in its World Economic Outlook (WEO) for July titled “Fault Lines Widen in the Global Recovery” released on Tuesday in Washington DC.
According to it, the slow rollout of vaccines was the main factor weighing on the recovery for Low Income Developing Countries (LIDCs) which Nigeria is part of.
It also retained its 6.0 per cent growth forecast for the global economy for 2021 and 4.9 per cent in 2022, adding that though the global forecast was unchanged from the April 2021 WEO, there were offsetting revisions.
The IMF had at its 2021 Virtual Spring Meetings in April, projected a 2.5 per cent growth for Nigeria’s economy in 2021, up from 1.5 per cent it projected in January.
It said that in LIDCs, the overall fiscal deficit in 2021 was revised up by 0.3 percentage points from the April 2021 WEO, mainly because of the re-emergence of fuel subsidies as well as the additional COVID-19 and security related support in Nigeria.
“Still, at 5.2 per cent of Gross Domestic Product (GDP), the overall fiscal deficit remains well below that of advanced and emerging market economies, reflecting financing constraints, about 60 per cent of LIDCs are assessed to be at high risk of or in debt distress.
“The public debt-to-GDP ratio for 2021 is projected at 48.5 per cent.
“Several LIDCs have announced an intention to restructure their debts and some have sought debt relief under the G20 Common Framework (Chad, Ethiopia, and Zambia)”, it said.
On the global scene, the IMF said that uncertainty surrounding the global baseline remained high, primarily related to the prospects of emerging market and developing economies.
It added that although growth could turn out to be stronger than projected, downside risks dominated in the near term.
“On the upside, better global cooperation on vaccines could help prevent renewed waves of infection and the emergence of new variants; end the health crisis sooner than assumed, and allow for faster normalisation of activity, particularly among emerging market and developing economies.
“Moreover, a sooner-than-anticipated end to the health crisis could lead to a faster than-expected release of excess savings by households, higher confidence and more front-loaded investment spending by firms.”
On the downside, it said growth would be weaker than projected if logistical hurdles in procuring and distributing vaccines in emerging market and developing economies led to an even slower pace of vaccination than assumed.
The report added that such delays would allow new variants to spread, with possibly higher risks of breakthrough infections among vaccinated populations.
“Emerging market and developing economies in particular could face a double hit from tighter external financial conditions and the worsening health crisis, further widening the fault lines in the global recovery.
“Weaker growth would in turn further adversely affect debt dynamics and compound fiscal risks.
“Finally, social unrest, geopolitical tensions, cyber-attacks on critical infrastructure, or weather related natural disasters, which have increased in frequency and intensity due to climate change could further weigh on the recovery.”
On ensuring a fast paced recovery, the IMF said the highest priority was to ensure rapid, worldwide access to vaccines and substantially hasten the timeline of rollout relative to the assumed baseline pace.
According to it, the global community need to vastly step up efforts to vaccinate adequate numbers of people and ensure global herd immunity.
This, it said, would save lives, prevent new variants from emerging and add trillions to the global economic recovery.
