IMF predicts growth slowdown for Nigeria in 2009

The International Monetary Fund (IMF) has stated that Nigeria and other crude oil exporters in Africa will experience sharp growth slowdown in their economies for the 2009 financial year.

In its World Economic Outlook (WEO) report released in Istanbul, Turkey yesterday, the Bretton Wood institution indicated that the country's real Gross Domestic Product (GDP) growth rate would slow to 2.9 per cent from the 7 per cent recorded in 2007 and the 6 per cent recorded in 2008. The report also said real GDP growth would likely climb to 5 per cent by the end of 2010.

Also, the institution's Economic Counsellor and Director of the Research Department, Mr. Olivier Blanchard, said growth had slowed significantly in Nigeria partly because of fall in oil production, slump in prices and financial market stress.

The WEO, made available to the News Agency of Nigeria (NAN) at the 2009 IMF/World Bank Annual meetings in Istanbul, stated that growth in the country would resume in 2010.

Nigeria has had a steady growth rate of about 7 per cent for close to eight years, which raised hopes that it would meet some of the targets of the Millennium Development Goals (MDGs) by 2015, according to the Agency.

The Central Bank of Nigeria's (CBN) economic report on the economy for the first half of the year said growth had slowed to 4.5 per cent, while headline inflation was still at a double digit, NAN stated.

But according to the IMF detailed report, relative to their 2004–08 performance, oil exporters (Angola, Equatorial Guinea, Nigeria) are expected to experience the sharpest growth slowdowns in 2009, as oil revenues have fallen hard.

“GDP growth in oil importers is projected to decelerate as well, from about 5 per cent in 2004–08 to 1½ per cent in 2009, as their exports contract. Real GDP in South Africa, the largest economy of the region and an oil importer, is projected to contract by 2.2 per cent in 2009. Growth is expected to resume during the second half of 2009, supported by expansive fiscal and monetary policies and the projected recovery in global trade”, the report revealed.

“On the other hand, many low-income countries in the region that have more diversified commodity exports seem to be weathering the global recession fairly well and are placed to quickly return to the higher growth paths of the mid-2000s. Inflation in the African region is projected to fall from about 10½ per cent in 2008 to 9 per cent in 2009, before easing to 6½ per cent in 2010”, it added.

The report said the outlook on Africa was still uncertain, noting that a weaker–than–expected recovery of the global economy would slow the recovery in markets and worsen the prospects for inflows. The inflows that would be affected, the report argued, included remittances and foreign direct investments, according to NAN.
“Moreover, a tightening of global financial conditions may have repercussions for the emerging markets of the region, although probably less than elsewhere because of the relative reliance on private financing,” the report added.

Apart from the contraction of inflows in remittances and foreign direct investment, the report said donor countries, mired in severe recession, might reduce aid to some African countries. The report said poverty would increase in sub-Sahara Africa as real GDP per capita contracted, while unemployment would be on the rise.
Going forward, the report stated that policies should be geared toward mitigating the impact of the global recession on economic activity and poverty, while strengthening foundations for sustained growth.

Nigeria's National Bureau for Statistics said the inflation rate in Nigeria stood at 11 per cent in August, which is a drop from the 15 per cent recorded in December 2008. The CBN governor, Sanusi Lamido Sanusi, had said that inflation rate would drop to a single digit before the close of 2009, according to NAN.

IMF also revealed that the global economic crisis is hitting low-income countries harder than anticipated, increasing their need for donor aid. The Fund however, noted that past gains from macroeconomic stabilisation and debt reduction, together with some increase in aid, have created space in many countries for countercyclical policies.

In the regional perspectives section on Africa titled, 'Regaining Momentum', the report noted that growth in Africa has slowed significantly as a result of the collapse of global trade and disruptions in global financial markets, but growth is expected to regain momentum as the global recovery gets under way.

Subsequently, the impact of the fall in financial flows propagated to oil exporters (including Algeria, Angola, Libya, Nigeria), manufacturing exporters (Morocco, Tunisia), and commodity exporters (Botswana) as global trade collapsed. The recent improvement in financial conditions and commodity prices, however, will help these economies recover from the damage.