W’Bank Cuts Nigeria’s GDP Growth Forecast to 2.1% for 2019

The World Bank Group has predicted real Gross Domestic Product (GDP) growth rate of 2.1 per cent for Nigeria for 2019, slightly lower than the 2.2 per cent it had predicted for the country same year in a report early this year.

But the bank projected a 2.2 per cent growth for the country for 2020 and 2.4 per cent for 2021.

The Washington-based institution stated this in its June 2019 Global Economic Prospects titled: ‘Heightened Tensions, Subdued Investment,’ that was released wednesday.

The Nigerian economy, which is gasping for stimulus, slowed to 2.1 per cent in the first quarter of 2019 (Q1, 2019), according to data released by the National Bureau of Statistics (NBS) last month.

But according to the World Bank, growth rates in low-income countries were expected to rise to six per cent in 2020, slightly higher than 5.4 per cent in 2019, but said ” is still not enough to substantially reduce poverty.”

It added: “While a number of low-income countries progressed to middle income status between 2000 and 2018, the remaining low-income countries face steeper challenges to achieving similar progress. Many are poorer than the countries that made the leap to higher income levels and are fragile, disadvantaged by geography and heavily reliant on agriculture.”

Furthermore, the multilateral institution noted that global economic growth was expected to ease to a weaker-than-expected 2.6 per cent in 2019 before inching up to 2.7 per cent in 2020. It, however, anticipated that growth in emerging market and developing economies was expected to stabilise next year as some countries move past periods of financial strain, but economic momentum remains weak.

“In 2020, growth in South Africa is anticipated to rise to 1.5 per cent; growth in Angola is anticipated to pick up to 2.9 per cent; and growth in Nigeria is anticipated to edge up to 2.2 per cent in 2020,” the World Bank predicted.

“Regional growth is expected to accelerate to 3.3 per cent in 2020, assuming that investor sentiment toward some of the large economies of the region improves, that oil production will recover in large exporters, and that robust growth in non-resource-intensive economies will be underpinned by continued strong agricultural production and sustained public investment. “While per capita GDP is expected to rise in the region, it will nevertheless be insufficient to significantly reduce poverty,” it added.

According to the World Bank, emerging and developing economy growth would be constrained by sluggish investment and with risks tilted to the downside.

It listed these risks to include rising trade barriers, renewed financial stress, and sharper-than-expected slowdowns in several major economies, the World Bank says in its Structural problems that misallocate or discourage investment also weigh on the outlook.

“Stronger economic growth is essential to reducing poverty and improving living standards,” World Bank Group President David Malpass said.

“Current economic momentum remains weak, while heightened debt levels and subdued investment growth in developing economies are holding countries back from achieving their potential. It’s urgent that countries make significant structural reforms that improve the business climate and attract investment. They also need to make debt management and transparency a high priority so that new debt adds to growth and investment.”

Growth among advanced economies as a group was anticipated to slow in 2019, especially in the Euro Area, due to weaker exports and investment. U.S. growth is forecast to ease to 2.5 per cent this year and decelerate to 1.7 per cent in 2020. Euro Area growth was projected to hover around 1.4 per cent between in 2020-2021, with softness in trade and domestic demand weighing on activity despite continued support from monetary policy.

“Investment growth among emerging and developing economies is expected to remain subdued and below historical averages, held back by sluggish global growth, limited fiscal space, and structural constraints. A sustained pickup in investment growth is necessary to meet key development goals. Business climate reforms can help encourage private investment.

“Sharp currency depreciations are more common in emerging and developing economies than in advanced economies, and central banks are often required to respond to these fluctuations to maintain price stability. The exchange rate pass-through to inflation is more limited when central banks pursue credible inflation targets, operate within a flexible exchange rate regime, and are independent of the central government.

“In the current environment of low global interest rates and weak growth, additional government borrowing might appear to be an attractive option for financing growth-enhancing projects,” said World Bank Prospects Group Director Ayhan Kose.

“However, as the long history of financial crises has repeatedly shown, debt cannot be treated as a free lunch,” he added.

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