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Judging IMF Tea Leaves

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Saturday, April 13, 2018 /11:03PM / Proshare Research

Quantitative variables  

Unlike 2016 where severe shocks from declining oil prices and productivity affected the macro path of the nation forcing the fund to adjust its base case scenario. In 2018, the fund seems to be comfortable with the existing base line, admitting that the recovery will go on. We thus take into consideration the following:
 

Headwinds

·        Escalation in  protectionism

·        Rising policy uncertainty as geopolitical tension remain  

·        Hike in Fund rates

·        Weakness in the  European bank still linger

·        Presence of undercapitalized banks

·        Re-emergence of shale oil production

·        Farmers and headmen clashes

Leg-winds

·  Improvement in State and local government finance, but fiscal capacity still remain diminished to their previous levels

·     Improved oil productivity

·    The global economy is growing in sync

·    The uncertainty of an election year and the policy inertia 


Although the funds growth forecast in 2017 was in tandem with actual outcome; inflation caved inwards beyond the funds projection of 17.5%. Thus the fund projects the following in 2018:
 

·     Growth to hit 1.9% on the back of  non-oil  and oil sector performance of 1.1% and 10%

·     Expect public investment to lag from 2.7% of GDP to 2.3% of GDP  growth

·    Private investment to shoot up from 9.8% of GDP to 10.5% of GDP,  still relatively lower than the pre-recession period

·    Investment tick from 13.5% of GDP to 13.8%  of GD

·     Current account to remain static at 1% of  GDP



Policy- Objective

·        Scaling up Revenue
·        Monitoring price movement
·        Addressing income inequality
·        Implementing a structural reform that accommodates growth
·        Enhancing resilient and further improving the efficiency of the banking sector
·        Address infrastructural deficit 

 

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