Fine-tuning of IMF growth forecasts


Wednesday, July 20, 2016 9:50AM /FBNQuest Research

The IMF’s latest World Economic Outlook (WEO) has trimmed its forecast for global output growth this year by 10bps from three months ago, to 3.1%, while leaving next year’s unchanged at 3.4%.

The rationale for this and the other, mostly modest, changes to its forecasts is that Brexit has added to market and macroeconomic uncertainties in the near term. Other than Nigeria, the changes of note to the forecasts for 2016 from three months ago are for smaller contraction in Brazil (-3.3%) and in Russia (-1.2%).

China last week reported growth for Q2 2016 of 6.7% y/y, marginally ahead of market consensus of 6.6% and unchanged from the previous quarter. The government target for the full year is between 6.5% and 7.0%.  

India is again the fastest growing economy in the WEO forecasts (see table).

For Nigeria, the WEO now projects GDP growth of –1.8% this year, compared with 2.3% in its update in April. This brings it into line with other multilaterals and most market analysts (we have -1.2%), and is based on lower oil receipts, lower power generation and fragile investor sentiment. For 2017, the WEO has a modest recovery to 1.1% growth.

The Fund has raised its price assumptions, based on the futures markets, for its basket of three crude blends (including UK Brent and therefore, indirectly, Bonny Light) to US$42.9/b this year and US$50.0/b in 2017. The commentary picks out Nigeria (and Canada) as examples of supply shortfalls which have underpinned the spot price of crude in the past quarter.

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