Nigeria’s economic growth projection has been revised downward by 0.2 percentage point from 3.3 to 3.1 amid weaker than expected activity in the first quarter of this year.
This has in turn led to a downward revision of economic growth in sub-Saharan Africa.
This is according to the World Economic Outlook (WEO) update by the International Monetary Fund (IMF) released on Tuesday.
According to the projection, Nigeria’s growth forecast was revised downward by 0.2 from the earlier projection in April.
“The forecast for growth in sub-Saharan Africa is revised downward, mainly as a result of a 0.2 percentage point downward revision to the growth outlook in Nigeria amid weaker than expected activity in the first quarter of this year” the report stated.
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The Bretton Wood institute raised alarm that some near-term risks have gained prominence from the previous outlook.
“Overall, risks to the outlook remain balanced, as in the April 2024 WEO, but some near-term risks have gained prominence. These include upside risks to inflation that stem from a lack of progress on services disinflation and price pressures emanating from renewed trade or geopolitical tensions.
Risks of persistent inflation in the services sector are tied to both wage and price setting, given that labor accounts for a high share of the costs in that sector. Higher nominal wage growth, which in some cases reflects the catch-up of real wages, if accompanied by weak productivity, could make it difficult for firms to moderate price increases, especially when profit margins are already squeezed.
This could lead to further stickiness in wage and price inflation. The escalation of trade tensions could further raise near-term risks to inflation by increasing the cost of imported goods along the supply chain.
Bumpiness along the remaining disinflation path could destabilize the return to price stability if short-term expectations spike upward as a result of disappointing inflation data” the report stated.
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Also, the IMF held its global growth expectations for 2024. The Fund expects the world economy to grow 3.2 percent this year, unchanged from its April forecast, according to its World Economic Outlook update.
“Global activity and world trade firmed up at the turn of the year, with trade spurred by strong exports from Asia, particularly in the technology sector,” said the fund.
For 2025, it expects global growth of 3.3 percent.
The Washington-based lender also warned that the prospect of interest rates staying elevated for longer, “in the context of escalating trade tensions and increased policy uncertainty” lingers.
A resurgence of tariffs can also trigger retaliation and a “costly race to the bottom,” said the report.
Another source of uncertainty is the chance of “significant swings in economic policy as a result of elections this year, with negative spillovers to the rest of the world.”
