According to the World Economic Outlook report, October 2023, published by the International Monetary Fund (IMF) during the World Bank/IMF Annual Meetings in Marrakesh, Morocco, Nigeria’s economic growth is expected to slow down to 2.9 percent in 2023, from the previous estimate of 3.3 percent. This is lower than the 3.75 percent growth target set by the Federal Government in its 2023 budget.
The IMF attributed the downward revision to the adverse impact of high inflation on consumption of goods and services in the country. It also urged the Federal Government to increase interest rates to curb inflation.
However, the IMF also praised the recent reforms by the Federal Government, such as the removal of fuel subsidy and the elimination of multiple exchange rates, saying that they will lead to a stronger and more inclusive economic growth in the country.
The IMF also lowered its economic growth forecast for sub-Saharan Africa to 3.3 percent in 2023, from the previous estimate of 3.4 percent. The global economy, however, is projected to grow at 3.0 percent, unchanged from the July forecast.
“The global economy is limping along, not sprinting. According to our latest projections, world economic growth will slow from 3.5 percent in 2022 to 3 percent this year and 2.9 percent next year, a 0.1 percentage point downgrade for 2024 from July. This remains well below the historical average”, the IMF said.
In its forecast for SSA and Nigeria, the IMF said: “In sub-Saharan Africa, growth is projected to decline to 3.3 percent in 2023 before picking up to 4.0 percent in 2024, with 0.2 percentage point and 0.1 percentage point downward revisions for 2023 and 2024, respectively, and with growth remaining below the historical average of 4.8 percent. The projected decline reflects, in a number of cases, worsening weather shocks, the global slowdown, and domestic supply issues.
The October WEO press briefing at the World Bank/IMF Annual Meetings in Marrakesh, Morocco, featured Daniel Leigh, the head of the World Economic Studies Division at the IMF. He said that South Africa’s growth rate would drop from 1.9 percent in 2022 to 0.9 percent in 2023. The main reason for this decline is the lack of power supply, but the forecast is 0.6 percentage point higher than before because the power shortages in the second quarter of 2023 were not as severe as expected.
He said: “For Nigeria in particular we have a growth forecast that goes from 3.3 per cent this year to 2.9 percent next year before going up to 3.1 in 2024 there is a downward revision for this year, partly this is because of the demonetization, the high inflation, the shocks to agriculture and hydrocarbon output. That is coming on top of all those external headwinds.
“We also add that President Tinubu has moved quickly with important reforms including ending the fuel subsidies and unifying the official exchange rates. We welcome these initial bold reforms because we see them as paving the way towards stronger and inclusive growth.”
The IMF has urged Nigeria and other countries to increase their interest rates to tackle the persistent inflation that threatens their economic growth. In a special report, titled, “In pursuit of stronger growth and resilience”, the IMF said that inflation was the most urgent risk for the African continent’s economy and recommended more monetary tightening (interest rate hike) for Nigeria and other countries with high inflation.