April 16, 2019

A global pick-up in H2, according to the WEO

The IMF’s latest World Economic Outlook (WEO) has trimmed its global growth forecast for this year from 3.5% to 3.3%, and left its projection for 2020 unchanged at 3.6%. That for the US for 2019 has been reduced from 2.5% to 2.3% on the declining impact of the fiscal stimulus by the Trump administration. Among the downward revisions for 2019 of at least 20bps since January, we highlight the Eurozone, Brazil, India (albeit from 7.5% to 7.3%) and South Africa. The WEO again stresses the downside risks, led by trade tensions.

                                                                                                                  

  • Economic activity is set to pick up in the second half on the back of policy accommodation in advanced economies, a fiscal and monetary stimulus in China, and hopes of an easing of US-Chinese trade tensions. This pick up explains the forecast of higher global growth next year.
  • Nigeria is just one example of the resumption of portfolio flows to EMs, which the WEO notes alongside a strengthening of currencies relative to the dollar. The latter is yet to materialize although the CBN has said more than once that it is warranted.
  • The assumptions, based on the futures markets, for the Fund’s basket of three crude blends (including UK Brent) are now a decline of -13.4% this year to US$59.26b and a modest fall of -0.2% for 2020 to US$59.0/b. These numbers look overly conservative in view of the many geopolitical tensions.

 

Trends in world output growth (% chg y/y)

F=forecasts

Sources: IMF, World Economic Outlook, Apr 2019; FBNQuest Capital Research

 

  • The WEO has upped its growth projections for Nigeria for this year and next to 2.1% and 2.5% from 2.0% and 2.2%. In a note released on 03 April and entitled Nigeria; Mobilizing Resources to Invest in People, the Fund argues that “two or three big-ticket items could lift revenue sustainably”. It is not alone in feeling that a dramatic boost in revenue collection would help to lessen several of Nigeria’s core weaknesses over time.