World 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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