The IMF’s new update to its World Economic Outlook has left its global growth forecasts of 3.9% for this year and next unchanged from April. Those for the US are also unchanged since they already incorporate the boost from the Trump administration’s tax reforms. The outlook has slightly lower growth this year and/or next than in April for the Eurozone, Japan, Brazil and India. The narrative is that global expansion is becoming less even and has peaked in some major economies, and that the risks to the outlook, including to the short term, are mounting.
- The underlying message of the update to the outlook, entitled Less even expansion, rising trade tensions, is that most governments need to rebuild fiscal buffers to create space for the next downturn.
- We stress that these baseline forecasts assume fewer hikes in the Fed funds rate than currently anticipated by the FOMC, and only incorporate those measures taken up to 06 July in the current trade disputes. The next downturn, therefore, may come sooner than forecast in the outlook.
- The price assumptions, based on the futures markets, for the Fund’s basket of three crude blends (including UK Brent) are now an increase of 33.0% this year to US$70.2/b and a decline of 1.8% for 2019 to US$69.0/b.
- The assumption for 2019 is more than US$10/b higher than three months ago, which helps to explain why the outlook’s forecast for growth in Nigeria next year has been raised from 1.9% to 2.3%. That for 2018 is unchanged.
Sources: IMF, World Economic Outlook, Jul 2018 update; FBNQuest Capital Research
- We see growth at 2.2% and 2.4% for Nigeria this year and next, fuelled by a modest fiscal stimulus, a pick-up in oil production, selective private investment and the boost to fx availability arising from the CBN’s fx reforms. For the record, the approved 2018 budget assumes 3.5% GDP growth.