The International Monetary Fund (IMF) has released its World Economic Outlook Update, advising central banks to focus on restoring price stability and reinforcing financial supervision and risk monitoring.
The IMF emphasizes the need for building fiscal buffers while ensuring targeted support for the most vulnerable in the economy.
The report, issued on Tuesday, July 25, highlights concerns regarding Nigeria’s economic outlook, projecting a gradual decline in economic growth due to security issues in the country’s oil sector.
According to the IMF’s projections, Nigeria’s economic growth for 2023 and 2024 is expected to experience a gradual decline, aligning with the earlier April projections, primarily impacted by security challenges in the oil sector.
For 2023, the IMF predicts a growth rate of 3.2%, followed by a growth rate of 3% in 2024 for Nigeria.
The report further notes that crude oil prices rose by 39% in 2022 and are expected to decline by approximately 21% in 2023, reflecting the global economic slowdown that affects resource-dependent economies.
The WEO emphasizes the necessity of phasing out untargeted fiscal measures, including those that blunt price signals. As an example, energy subsidies are highlighted as unsustainable, given that energy prices have broadly returned to pre-pandemic levels.
Insights on Developing Economies
The report sheds light on the challenges faced by developing economies, such as Nigeria, including rising inflation and a slowdown in industrial activity.
Gross fixed capital formation and industrial production have experienced sharp slowdowns or contractions in major advanced economies, which have consequently impacted international trade and manufacturing in emerging markets.
Additionally, the IMF report points out that large short-term external financing needs are stretching the ability of numerous emerging market economies and low-income countries to service their debt. Sovereign spreads remain historically elevated, hindering market access for economies reliant on short-term borrowing.
The IMF advocates for faster and more efficient coordination on debt resolution, including through the Group of Twenty (G20) Common Framework and the Global Sovereign Debt Roundtable, to lower short-term borrowing costs and prevent the spread of debt crises.
Addressing Climate Change and Emerging Technologies
The report emphasizes the importance of sufficient energy supplies to meet countries’ decarbonization goals.
It highlights the necessity of multilateral cooperation to accelerate the green transition, mitigate climate change, and regulate potentially disruptive emerging technologies, such as artificial intelligence (AI).
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