FY 2018 Outlook - A Rising Tide


Wednesday, January 17, 2018 /09:30AM / CardinalStone Research   

Global - Global economy to strengthen in 2018
The IMF projects global GDP growth at 3.7 percent even as expectations for global economy remains upbeat. Domestic consumption, on the back of improving consumer confidence as well as tax cuts effect, is expected to further catalyze growth in the United States in 2018. More so, with inflation expected to rise further in line with- or beyond- expectations, more Fed rate hikes are anticipated during the year. 

The Euro Area looks to shrug off economic repercussions of Brexit towards ensuring steady growth for the region. Likewise, emerging market economies are expected to further consolidate on recovery experienced in 2017 and possibly be a key driver for global growth in 2018

Nigeria Economy - the party just started!
Nigeria's Gross Domestic Product is projected to consolidate further in 2018 following the rebound from economic recession in 2017. Rising consumer confidence indicates positive outlook for private consumption which is expected to be a key driver for growth.  Furthermore, oil price stability together with the observed decline in oil production disruptions, presents opportunities for a more sustainable growth. 

These, alongside moderation in FX demand, increased foreign direct inflows and a relatively liquid FX transaction window, further translates into positive implications for the domestic currency. More so, growth is expected to feed off an expansionary fiscal theme, with particular pivot towards infrastructure building and a reduction in the high unemployment rate.

This rides on expectations of government's capability to meet a significant portion of its funding needs through increased oil revenues, higher tax collections and increased, yet sustainable, external borrowing. Likewise, monetary policy is projected to ease following expectations of continued moderation in inflation.

Financial Markets - Improving optimism positive for equities
Following the rally in the equities market in 2017, we expect momentum to remain positive given optimistic outlook for macro-economic fundamentals. Nevertheless, we are cautious in our excitement as any disappointment in corporate results, or political tension in the pre-election year, can spook the market and cause it to falter. Other than these concerns, we expect the bulls to ride the year. 

Our outlook for the fixed income market hinges on the pace of inflation decline. In the short to mid-term, however, we expect a sustained decline in yields in the face of the much anticipated monetary policy easing. 

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*prices as at January 16, 2018

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