A Cyclical Upswing According to the Fund; Forecasts 2.1% Growth for Nigeria

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Tuesday, January 23, 2018 /9:09AM /FBNQuest Research


The IMF’s new Update to its World Economic Outlook has raised its global growth forecast for this year from 3.7% three months ago to 3.9%, and penciled in the same for 2019. That for the US has been lifted from 2.3% to 2.7% for 2018. 

Whereas three months ago the outlook did not allow for any fiscal stimulus, it now incorporates the tax reforms of the Trump administration, which it sees as positive for growth through to 2020. Elsewhere, compared with October, the outlook has stronger growth this year in the Eurozone, Japan, Brazil, Russia and China.   

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Short-term risks are again seen as broadly balanced, medium-term tilted to the downside. The latter include the possibility of a correction in financial markets, triggered perhaps by higher than expected core inflation and interest rates in developed economies, as well as protectionist policies and geopolitical tensions. 

Financial turmoil in emerging economies, notably China, no longer features among the outlook’s identified risks. 

The price assumptions, based on the futures markets, for the Fund’s basket of three crude blends (including UK Brent) are now an increase of 11.7% this year to US$59.9/b and a decline of 4.3% for 2019 to US$56.4/b. 

The outlook’s forecasts for growth in Nigeria this year and next are 2.1%, raised from 1.9%, and 1.9%. Interestingly, the commentary cites the political uncertainty in South Africa but does not allude to the elections in Nigeria scheduled for early 2019.
 

Trends in world output growth (% chg y/y)

 

2017E

2018F

2019F

World

3.7

3.9

3.9

US

2.3

2.7

2.5

Eurozone

2.4

2.2

2.0

Japan

1.8

1.2

0.9

Brazil

1.1

1.9

2.1

Russia

1.8

1.7

1.5

India

6.7

7.4

7.8

China

6.8

6.6

6.4

SSA

2.7

3.3

3.5

Nigeria

0.8

2.1

1.9

South Africa

0.9

0.9

0.9

 

Sources: IMF, World Economic Outlook, Update January 2018; FBNQuest Capital Research

 

We see growth of 2.4% for Nigeria this year, driven by a modest fiscal stimulus, a pick-up in oil production, selective private investment and the boost to fx availability arising from the CBN’s multiple currency windows.   

Proshare Nigeria Pvt. Ltd.

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