the International Monetary Fund (IMF), on Tuesday, reduced the 2022 growth forecast for Nigeria to 3.2% from the 3.4% it projected in June, noting that Nigeria’s economic growth could sink further to 3.0% in 2023. Updated The Fund also revised the 2022 growth forecast for South Africa to 2.1% from the 2.12% projected in June.
As a result, growth in Sub-Saharan Africa is now expected to slow to 3.6% in 2022 from 4.7% in 2021 and then may increase to 3.7% in 2023. The fund also cut global growth in the fourth quarter. chance from 6.0% in 2021 to 3.2% in 2022 and 2.7% in 2023. This is the weakest global growth forecast since 2001, except during the global financial crisis and the acute phase of COVID-19 pandemic. The weak growth forecast indicates a significant slowdown for the largest economies: a US GDP contraction in the first half of 2022, a euro area contraction in the second half of 2022, and prolonged COVID-19 outbreaks and lockdowns in China with a growing crisis in the property sector. .
According to the IMF, the reduction in the growth forecast is based on the existing global supply chain disruptions, which have pushed inflation to a large extent and raised fears of a global recession as central banks tighten monetary policy to tame rising inflation. food and energy prices. The Fund further noted that global economic activity has experienced a broad-based and sharper-than-expected slowdown, with inflation higher than seen in many decades. The cost-of-living crisis, tightening fiscal conditions in most regions, Russia’s invasion of Ukraine, and the lingering effects of the COVID-19 pandemic all weigh on the outlook. Based on the report, global inflation is estimated to increase from 4.7% in 2021 to 8.8% in 2022 but will decrease to 6.5% in 2023 and to 4.1% in 2024 and governments are advised to use monetary policy to restore price stability, while applying. fiscal policy to reduce cost of living pressures. Structural reforms can further support the fight against inflation by improving productivity and easing supply constraints, while multilateral cooperation is needed for
fast track the green energy transition and prevent fragmentation.
We forecast in our H2 outlook that Nigeria’s economy is expected to grow by 2.8% in 2022. Our outlook is informed by continued negative growth in the Oil sector (-11.77% in Q2 from -26.04% in Q1 2022); slow growth in Agriculture (1.2% in Q2 from 3.16% in Q1) due to widespread uncertainty; and weakening growth in the manufacturing sector (3% growth in Q2 from 5.89% in Q1) due to rising operating costs. Crude oil production fell to an all-time low of 0.97mbpd (excluding condensate) in August 2022 and is expected to remain below the budgeted benchmark of 1.6mbpd. The monetary Policy Committee (MPC) maintained a hawkish stance with the Monetary Policy Rate (MPR) at a 20-year high of 15.5% and the Cash Reserve Ratio (CRR) jacked up to 32.5%. We expect this to continue to hamper business growth as capital costs rise.
We note in particular that the low foreign exchange earnings from crude oil exports remain a key drag on the Naira value against the greenback thus exacerbating the exchange rate risk for the expected foreign investment inflows. The Russia-Ukraine war caused by the disruption of the supply chain and its impact on global inflation continues to cause increased interest in advanced economies, which in turn will continue to stimulate capital flows from the developing market.