…Urges Nigeria to adopt flexible foreign exchange policy
Oscarline Onwuemenyi, with agency reports
19 April 2017, Sweetcrude, Abuja – The International Monetary Fund, IMF, has forecast 2.6 percent growth in sub-Saharan Africa this year, aided by a modest recovery in large economies South Africa, Nigeria and Angola.
“Growth is projected to rise to 2.6 percent in 2017 and 3.5 percent in 2018, largely driven by specific factors in the largest economies, which faced challenging macroeconomic conditions in 2016,” the IMF said its latest World Economic Outlook report.
A slump in commodity price in 2016 and devastating drought had affected growth in several countries in the region, resulting in 1.4 percent growth of gross domestic product (GDP).
Nigeria, the continent’s most populous nation and a leading oil producer, was expected to return to growth in 2017 after a challenging 2016 characterised by recession, a dip in oil prices and energy shortages.
“Output in Nigeria is projected to grow by 0.8 percent in 2017 as a result of a recovery in oil production,” said the report, also citing sustained growth in the agricultural sector.
South Africa, which was hit by slow growth in 2016 was expected to register a slight improvement of 0.8 percent, up from 0.3 percent in 2016, as the impact of devastating drought was beginning to recede and electricity capacity improved.
The continent’s most advanced economy is currently reeling from a recent downgrade to “junk” status by two credit ratings agencies, Standard & Poor’s and Fitch, something which could have an adverse impact on the already anaemic economy.
Another regional black gold producer, Angola, which experienced zero growth in 2016, was expected to show improvement this year, thanks to the effects of economic diversification.
Although there were signs of recovery in the region, the international lender warned that the outlook remained subdued.
“Many of the largest non-resource intensive countries will find it increasingly hard to sustain growth through higher public capital spending, as they have done in the past, in the face of rising public debt and a slowing credit cycle.”
It said output growth was expected “only moderately” to exceed population growth over the forecast horizon.
Double digit inflation was forecast in several countries, including Nigeria, Angola and Ghana, following a sharp depreciation of their respective currencies in recent months.
Meanwhile, the IMF has also advised Nigeria to adopt flexible foreign exchange regime to restore values of revenues and the naira.
Speaking at a media briefing to unveil the WEO, at the ongoing IMF/World Bank Spring Meetings in Washington D.C, IMF’s Chief of the World Economic Studies Division, Oya Celasun, said the nation’s economy will benefit from flexible exchange rate.
She also challenged Nigeria and other African countries to adjust their fiscal policies, in line with the continued drop in crude oil prices.
“Fiscal policy has to adjust to new realities of oil price fall, even though it is a difficult adjustment. It requires coherent of policies. In many cases, that should be achieved by focusing more on domestic revenue mobilization and to some extent, by rationalizing expenditures,” she said.
Celasun said there was also broader need to diversify the economy away from basic commodities of growth, such as crude oil to achieve sustainable growth.
Also speaking at the press conference, IMF’s Economic Counsellor/ Director of Research, Maurice Obstfield, said the Fund will continue to engage governments from emerging markets, but added that it was hard to be optimistic because of the challenges faced by such economies.
He said that each African country remains different in terms of economic challenges they face, stressing that such problems will require diverse solutions.
He projected that world economy will grow at a pace of 3.5 per cent this year, up from 3.1 per cent last year, and 3.8 per cent in 2018.