The International Monetary Fund (IMF) has predicted that Nigerian’s Gross Domestic Product (GDP) would drop by -5.4 per cent in the 2020 fiscal year.
This is against its earlier – 3.4 per cent decline in GDP prediction in April this year.
However, the global financial institution said Nigeria’s economy will see a rebound of 2.6per cent in 2021 suggesting an increase of 200 basis points when compared to the 2.4 per cent April projection for 2021.
The Washington based lender made these projections yesterday during the unveiling of the June 2020 World Economic Outlook.
Nigeria faces economic distress not only from the coronavirus outbreak, but also from a sharp fall in crude oil prices.
The Federal Government has said it expects the economy to contract by 3.4per cent this year. In May, however, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said the economy could shrink by as much as 8.9per cent this year in a worst-case scenario.
Meanwhile, the cost of living in Nigeria has risen steadily. Annual inflation rose for the ninth straight month in May, to a two-year high of 12.4 per cent.
On the global economy in 2020 and 2021, the IMF predicted a decline of 4.9 per cent and 3.0 per cent respectively, representing a 3.0 per cent contraction in 2020 and a recovery of 2.2 per cent in 2021.
According to the IMF, compared to our April World Economic Outlook forecast, “we are now projecting a deeper recession in 2020 and a slower recovery in 2021.”
This forecast, the report said, “assumes that financial conditions-which have eased following the release of the April 2020 WEO, will remain broadly at current levels.
Alternative outcomes to those in the baseline are clearly possible and not just because of how the pandemic is evolving.”
IMF said it is “projecting a synchronised deep downturn in 2020 for both advanced economies and emerging markets and developing economies.”
“The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast.”
For economies struggling to control infection rates, a lengthier lockdown, the IMF said will inflict an additional toll on activity.
Where economies are reopening, targeted support the IMF explained “should be gradually unwound as the recovery gets underway, and policies should provide stimulus to lift demand and ease and incentivise the reallocation of resources away from sectors likely to emerge persistently smaller after the pandemic.”
The IMF noted that “overall, this downgrade would leave 2021 GDP some six per cent percentage points lower than in the pre-COVID-19 projections of January 2020.
The adverse impact on low-income households is particularly acute, imperiling the significant progress made in reducing extreme poverty in the world since the 1990s.”
It stated that “the extent of the recent rebound in financial market sentiment appears disconnected from shifts in underlying economic prospects-as the June 2020 Global Financial Stability Report (GFSR) Update discusses-raising the possibility that financial conditions may tighten more than assumed in the baseline.”
The IMF warned all countries-including those that have seemingly passed peaks in infections-to “ensure that their health care systems are adequately resourced.”
According to the fund, “the international community must vastly step up its support of national initiatives, including through financial assistance to countries with limited health care capacity and channeling of funding for vaccine production as trials advance, so that adequate, affordable doses are quickly available to all countries. ”
