02 October 2015, Sweetcrude, Abuja – Oil-exporting countries, including Nigeria, could see about 2.25 per cent loss in economic growth annually from 2015 to 2017, compared to 2012 to 2014, due to the sharp decline in commodity (oil) prices over the past year, according to the 2015 World Economic Outlook by the
International Monetary Fund.
“With a weak outlook for commodity prices, particularly for energy and metals, growth in commodity-exporting emerging and developing economies could slow further over the next few years,” the IMF stated.
The study, published in the forthcoming 2015 World Economic Outlook, suggests that the recent declines in commodity prices could shave off one percentage point annually from the growth rate of commodity exporters over 2015-17 as compared with 2012-14. In exporters of energy commodities, the drag is estimated to be even larger—about 2¼ percentage points on average.
This slowdown is not just a cyclical phenomenon, the study finds. “It has a structural component as well,” says lead author Oya Celasun, Deputy Division Chief in the Research Department.
“Investment, and accordingly, potential output, tend to grow more slowly in exporters during commodity price downswings.”
The decline in potential growth exacerbates the post boom slowdown, Celasun says. “This means that policymakers in commodity-exporting countries must go beyond demand-side measures and tackle structural reforms to improve human capital, increase investment and, ultimately, unleash higher productivity growth.”
It said an overall “weak” commodity price outlook would reduce the economic growth of all commodity exporters by roughly one per cent annually over that time.
The IMF stated in the report, “In exporters of energy commodities, the drag is estimated to be even larger – about 2.25 percentage points on average.
“Commodity-exporting economies are at a difficult juncture. Global commodity prices have declined sharply over the past three years, and output growth has slowed considerably among commodity-exporting emerging market and developing economies.”
In the study, the IMF argued that a variety of “cyclical and structural factors” were contributing to the growth slowdown, while other factors, including reduced government spending and policy changes, had lessened the impact of the global commodity downswing.
The IMF noted that policymakers must be realistic about growth potential in commodity-exporting economies, adding that the decline in potential growth could amplify the ongoing economic slowdown.
It noted that, “Policymakers in commodity exporting countries therefore need to be careful not to overestimate the extent of excess capacity in their economies. A significant deceleration in growth rates is unavoidable for many economies.
“Looking beyond the current juncture, the findings suggest that more flexible exchange rates and policy frameworks that avoid excessive pro-cyclical fiscal spending can help policymakers smooth the impact of commodity price swings on their economies.”
It added that, “Where growth is disappointing, policy efforts that focus on structural reforms to foster sustained medium-term growth are likely to be very fruitful.
“The structural reform priorities vary across countries, but removing infrastructure bottlenecks, improving the business climate, and enhancing the quality of education are common goals across many.”