Little change in Fund forecasts and remedies

The IMF’s latest World Economic Outlook (WEO) has left its global growth forecasts for this year and next unchanged at 3.1% and 3.4% respectively. Downward adjustments for this year from three months ago for the US (to 1.6% from 2.2%) and sub-Saharan Africa (to 1.4% from 1.6%) are balanced by improved projections for Japan (to 0.5% from 0.3%) and Russia (to a contraction of -0.8% from -1.2%). The WEO’s forecast for Nigeria is now 10bps better for this year at -1.7%, and that for 2017 trimmed to 0.6% from 1.1%.
A Fund remedy recommended for all country groupings is that the authorities pull all policy levers. In a Nigerian context, this would involve the harmonisation of fiscal and monetary policy. We have noted how the MPC routinely calls for support from the fiscal side to boost the economy.

The WEO advises those countries struggling with the slump in commodity prices to allow the exchange rate to absorb fully the resulting pressures. This advice is likely to fall on deaf ears in the CBN and the FGN, neither of which is in a hurry to risk a bona fide float for fear that official reserves are exhausted without the required external boost to inflows. Both bodies tend to be converted to a move on the exchange rate when there is no alternative.

India is again the fastest growing economy in the forecasts (see table). Taking a leaf out of China’s book from the last decade, it is to host the annual meetings of the African Development Bank in May 2017. The Fund suggests that near-term sentiment on China has recovered from “the acute anxiety” at the start of this year.

Little change in Fund forecasts and remedies

The underlying price assumptions, based on the futures markets, for the Fund’s basket of three crude blends (including UK Brent) are barely changed from July, at US$43.0/b for 2016 and US$50.6/b for 2017.

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