The IMF has predicted that Nigeria’s GDP will contract by 4.3%, which indicates an improvement compared with a negative GDP projection of 5.4% it had predicted in its previous report in June.
This is coming as the federal government has stated that it is not considering the relief package offered by the World Bank for low-income countries in the wake of the COVID-19 pandemic in order not to worsen the nation’s crippling debt situation.
IMF’s Chief Economist and Director of Research Department, Ms. Gita Gopinath, disclosed the country’s new GDP projection during a virtual media briefing to unveil the fund’s World Economic Outlook (WEO) at the ongoing Annual Meetings of the IMF/World Bank in Washington DC.
The report titled: ‘A long and difficult ascent, 2020 October,’ however, predicted that the economy would grow by 1.7 per cent in 2021.
Also, during a separate media briefing to unveil the Global Financial Stability Report (GFSR), the Director of Monetary and Capital Market Departments, IMF, Mr. Tobias Adrian, said banks are in a safer position than the last global economic crisis, adding that the IMF is closely monitoring the concessionary loans given to Sub-Saharan Africa.
Speaking on the projection for Africa, Gopinath said: “Overall for the region, the numbers are close to what we had in June, -3 per cent in 2020 and 3.1 per cent in 2021. There is significant heterogeneity in the within the region. You have countries that are commodity exporters who have been negatively impacted not just by the pandemic but by the drop in oil prices.
“Nigeria is one of such case and then you have countries like South Africa where there has been a very big hit in terms of the pandemic and a collapse in activities because of the requirements of lockdowns. There is always a difference in countries that are more diversified, that seem to have better growth prospects than other.”
She further added that the economic fallout of the COVID-19 pandemic would cause 20 million people in the continent to fall into extreme poverty.
She added: “It is also important to note that in Sub-Saharan Africa, the World Bank projects that over 20 million people will enter extreme poverty this year. These are very large numbers and several of these countries are also living with very high levels of debt distress.”
Responding to a question about emerging countries going through foreign currency volatility, depleting foreign reserves and how fiscal and monetary tools could be adopted to overcome the crisis, she said there was a need for emerging economies to closely restructure their debt to reduce and seek debt relief if allowed.
She said: “This pandemic is triggering divergence across advanced economies, emerging and developing economies. They have been hit by the health crisis and they have been hit because they are oil exporters which had collapsed and more importantly, they just don’t have the resources that advanced economies have to deal with this crisis.
“Because we don’t have a financial crisis at this point, many emerging markets are able to borrow at record levels in foreign currency this year relative to previous years.
“But that is not going to be enough and there would be a need for continued international support for many countries in terms of concessionary financing, aide and there are going to be developing and low-income economies that would need debt relief and, in some cases, restructuring of debt to make sure they have the space to do the spending that they need.”
On his part, the Division Chief, Research Department, IMF Mr. Malhar Nabar, said: “The oil exporters have also been hit very hard and the other commodity exporters such as South Africa has also been struggling through this crisis with deep contractions projected this year.
“But in terms of what the global outlook means for Africa, the partial recovery that we are projecting next year clearly has a beneficial impact on the outlook in terms of stronger external demand but one key element is that the external financial conditions which have been extremely tight for Sub-Saharan Africa over the past several months, a turnaround in those conditions and better access for Sub-Saharan African issuers to access external hard currency bond markets would actually, help with improving the outlook.”
Continuing, in the GFSR, Adrian said the various interventions and loans given to SSA which amounted to $21 billion are closely monitored to ensure they are not mismanaged.
He said: “Since the start of the pandemic, the IMF has provided financing to 81 countries and the total new financing is about $100 billion. Poverty Reduction and Growth Trust (PRGT) countries, which are mostly in Sub-Saharan Africa received about $21 billion and this is concessional.
“It is extremely important for the money to get to the right people. And we are watching very carefully and we are watching very closely to make sure that all these loans go into the right hands.”