IMF projects Nigeria’s economy to grow by 3.2% in 2023

IMF projects Nigeria's economy to grow by 3.2% in 2023

The International Monetary Fund (IMF) has reiterated its growth forecast for the Nigerian economy in 2023, projecting a 3.2 per cent growth rate, according to its recent report titled “World Economic Outlook: A Rocky Recovery 2023 APR”.

The report, released on Tuesday, highlighted that despite tentative signs of a soft landing for the global economy with declining inflation and steady growth in early 2023, stubbornly high inflation and recent financial sector turmoil have hampered progress.

The IMF report also pointed out that underlying price pressures remain persistent in several economies, as central banks raised interest rates while food and energy prices decreased. It noted that the fast rise in policy rates has resulted in side effects, such as banking sector vulnerabilities and fears of contagion in the broader financial sector.

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The report further highlighted that debt levels continue to be high, limiting the fiscal policymakers’ ability to respond to new challenges. Additionally, geopolitical tensions, ongoing wars, and supply-chain disruptions caused by COVID-19 strains are posing risks to the global economy.

The IMF’s baseline forecast assumes that recent financial sector stresses are contained, with growth projected to fall from 3.4 per cent in 2022 to 2.8 per cent in 2023, before slowly rising and settling at 3.0 per cent over the next five years. Advanced economies are expected to experience a pronounced growth slowdown, with growth rates declining to 1.3 per cent in 2023 from 2.7 per cent in 2022.

The report also emphasized that risks to the outlook are heavily skewed to the downside, with a heightened chance of a hard landing. Financial sector stress, contagion, sovereign debt distress, and geopolitical fragmentation could further weaken the real economy, requiring policy adjustments.

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IMF recommended that central banks maintain a tighter anti-inflation stance while being ready to adjust policy instruments as needed, and fiscal policymakers should support monetary and financial policymakers’ actions to address inflation and maintain financial stability.

Governments should aim for an overall tight stance with targeted support for those most affected by the cost-of-living crisis. In severe downside scenarios, automatic stabilizers and temporary support measures should be utilized, and medium-term debt sustainability should be achieved through fiscal consolidation and debt restructuring as necessary.

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The report also emphasized the importance of strengthening multilateral cooperation to create a more resilient world economy, including measures to bolster the global financial safety net, mitigate climate change costs, and reduce the adverse effects of geopolitical fragmentation.

As IMF continues to monitor and assess global economic trends, it remains crucial for policymakers to navigate challenges and implement prudent measures to foster sustainable economic growth. With the IMF’s growth forecast for the Nigerian economy in 2023, it is imperative for stakeholders to remain vigilant and responsive to evolving economic dynamics.

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