World Bank cuts Nigeria’s growth forecast to 2.0%

The World Bank has reviewed downward Nigeria’s economic growth forecast for this year to 2.0 per cent from its earlier projection of 2.1per cent in April.

The bank, which stated this in its October Africa’s Pulse report, released yesterday, also projected that the country’s economy would expand by 2.1 per cent in 2020 and 2021, which are 0.1 and 0.3 percentage points lower than its April forecasts, respectively.

According to the World Bank, multiple exchange rates, foreign exchange restrictions, high inflation, and low non-oil revenues among other obstacles, will ensure that Nigeria’s “medium-term growth outlook continues to be constrained by a weak macroeconomic policy environment and slow policy implementation.”

Similarly, citing a slowdown in fixed investment and policy uncertainty in global economy, the World Bank also cut its economic growth forecast for sub-Saharan Africa for 2019 to 2021 by 0.2 percentage points from its earlier projection.

It said the region’s economy was expected to grow 2.6per cent this year, from a 2.8per cent  projection in April, adding  that  growth would rise to 3.1per cent  in 2020 and 3.2per cent in 2021.

“Despite some improvements, the external environment is expected to remain difficult and uncertain for the region,” the bank stated

China and the United States, the world’s leading economies, this year, imposed new tariffs on each other’s goods as part of a long-running dispute over Beijing’s trading practices, which Washington says are unfair.

Those tensions, plus softening global growth and falling commodity prices, compounded by the slow pace of reforms in African countries, “are weighing on activity across the region”, the  World Bank said.

Specifically, it stated that drought, security threats, increases in the cost of public borrowing and private investment are also slowing growth on the continent.

The bank noted that Nigeria, South Africa and Angola, which make up about 60per cent of sub-Saharan Africa’s annual economic output, were all facing various impediments.

According to the bank, South Africa’s economy will expand 0.8per cent  this year, from a 1.3per cent forecast in April, and growth will rise to 1.0per cent in 2020 from its April forecast of 1.7 per cent.

It said it made the cuts in its forecasts for South Africa due to the sharp slowdown in GDP growth in the first quarter of this year, low investor sentiment, and persistent policy uncertainty, including whether a solution could be found for state power firm Eskom.

The bank said Angola’s economy would grow 0.7per cent this year, from its  projection of 1.0per cent  in April.

The rest of sub-Saharan Africa, excluding Nigeria, South Africa and Angola, is expected to grow 4.0per cent this year from the World Bank’s 4.4per cent projection in April, and 4.7per cent next year and 4.8per cent in 2021 in line with its April forecasts.

The bank said the proportion of African countries determined to be in debt distress or in high risk of external debt distress had doubled, but the pace of deterioration had reduced.

It, however, said Africa could be home to 90per cent of the world’s poor by 2030(up from 55per cent in 2015) as governments across the continent have little fiscal space to invest in poverty-reduction programmes and economic growth remains sluggish.

The bank warned that the prediction will come to pass unless drastic action is taken.

According to World Bank, “as countries in other regions continue to make progress in poverty reduction, forecasts suggest that poverty will soon become a predominantly African phenomenon.”

While the poverty rate in sub-Saharan Africa, defined as the percentage of people living on less than $1.90 per day, fell between 1990 and 2015, rapid population growth resulted in the number of poor people on the continent increasing to more than 416 million from 278 million over the same period, according to World Bank data.

The lender said pro-poor growth policies are required to accelerate poverty reduction and that fiscal tightening limits governments’ ability to spend on social sectors.

“Given the limited scope for redistribution and transfers to raise the incomes of the poor in most African countries, the focus should be squarely on raising their labor productivity, that is, what it will take to increase their earnings in self-employment or wage employment,” the bank stated.

It stated that government debt increased to 55per cent of GDP in 2018, from 36per cent  in 2013 due to a lack of fiscal consolidation after countries tried to counter the effects of the global financial crisis by boosting spending,  adding  that about 46per cent  of African countries were in debt distress or considered at high risk in 2018 compared with 22per cent five years earlier.

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