The International Monetary Fund plays a significant role in moulding economic policies of the world, including Nigeria. Accordingly, the IMF (Nigeria) Staff Country Reports gives kudos to the government in areas they reason are commendable, while offering options to areas they believe can have damaging effects on the economy.
Recently, the agency released a report wherein it raised Nigeria’s 2021 Gross Domestic Product (GDP) growth rate from 1.5 per cent to 2. 5 per cent.
This was contained in its World Economic Outlook (WEO) in which it also reduced next year’s growth forecast from 2.5 per cent to 2.3 per cent.
The IMF raised the 2021 projected Global growth from its October 2020 position of 5.5 per cent, to a new 6 per cent.
Global growth is projected at 6 percent in 2021, moderating to 4.4 percent in 2022. The projections for 2021 and 2022 are stronger than in the October 2020 WEO.
The upward revision reflects additional fiscal support in a few large economies, the anticipated vaccine-powered recovery in the second half of 2021, and continued adaptation of economic activity to subdued mobility.
The organisation noted that global prospects remained highly uncertain one year into the pandemic as the “New virus mutations and the accumulating human toll raise concerns, even as growing vaccine coverage lifts sentiment.
On prospects and policies, IMF said that although the contraction of activity in 2020 was unprecedented in living memory, extraordinary policy support prevented even worse economic outcomes.
The agency stated that the strength of the recovery will depend in no small measure on a rapid rollout of effective vaccines worldwide.
According to analysts, while a US tightening resulting from a stronger US economy tends to be better for most emerging market economies, a surprise tightening triggers capital outflows from emerging markets.
Hence, it will be important for advanced economies to explain clearly how they will implement their monetary policies during the recovery.
On recessions and recoveries of labour market, the IMF revealed that “Pre-existing employment trends favoring a shift away from jobs that are more vulnerable to automation are accelerating.
“Policy support for job retention is extremely powerful at reducing, scarring, and mitigating the unequal impacts from the acute pandemic shock.
“As the pandemic subsides and the recovery normalises, a switch toward worker reallocation support measures could help reduce unemployment more quickly and ease the adjustment to the permanent effects of the COVID-19 shock on the labor market.”
As IMF’s chief economist, Gita Gopinath, posited, a way out of the health and economic crisis is increasingly visible. Vaccinations, according to her, are likely to power recoveries in many countries in 2021. But she raises concerns as to how recoveries are diverging.
Countries with slower vaccine rollouts, more limited support from economic policy, and those more reliant on tourism are likely to do less well.
The first two of these are particular issues for developing countries. Many have less access to vaccines, and they also tend to find it more difficult to finance economic and health policy actions.
Among emerging and developing economies, China has already returned to pre-pandemic levels of economic activity. But many others in the group are not expected to do so until well into 2023.
The report says the cumulative losses in income per person over the period from 2020 to 2022 are likely to be 20% for those countries, compared with a less severe, but still large figure of 11% for the developed world.
The report also says that gains in poverty reduction have been reversed. It says people counted as extremely poor are likely to have increased by 95 million last year, with a rise of 80 million in the number who are undernourished.
The IMF maintained that the divergences are occurring not just between but also within countries. Income inequality is likely to increase as young people and those with relatively low levels of skills have been harder hit in both developed and developing countries.
Women have already been affected as they account for a large share of employment in some sectors, such as tourism, which involves personal contact largely.