IMF says trade policy uncertainty lowers investment and raises unemployment in Nigeria


the International Monetary Fund (IMF) has stated that trade policy uncertainty reduces investment and economic output and increases unemployment in indebted emerging economies such as Nigeria.

This was revealed in a recent IMF blog post examining the possible consequences of dissolving global trade links.

The Washington-based multilateral lender said that even without real restrictions, trade-related political uncertainty can worsen economic activity, causing companies to halt hiring and investing even as startups may decide to postpone entering the market. a market.

Implications of a trade policy shock: The IMF highlighted the implications of a trade policy shock, adding that not everyone is equally vulnerable. Part of the IMF publication read:

  • Our analysis shows that a typical shock to trade policy uncertainty, such as the build-up of tensions between the US and China in 2018, reduces investment by about 3.5% after two years. It also decreases gross domestic product by 0.4% and raises the unemployment rate by 1 percentage point. However, not everyone is equally vulnerable.
  • “The effects on investment are even larger for emerging markets and more open economies, and companies with high debt. Corporate debt has risen significantly in Asia since the global financial crisis, rising further in the wake of the pandemic, suggesting that heightened trade policy uncertainty could prove particularly damaging to the region.”

Tips for policymakers: The bank said that policymakers must act to avoid adverse effects and ensure that trade remains an engine of growth. The IMF said:

The news continues after this announcement.

  • “Rolling back harmful trade restrictions and reducing uncertainty through clear communication of policy objectives should be a priority. Complementing regional agreements with reforms at the multilateral level, while restoring a fully functional World Trade Organization dispute resolution system, can not only mitigate the potential negative impacts of discriminatory policies on other trading partners, but also it also helps resolve some of the underlying sources of tensions.”


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