A Little Better Message in the New WEO; 2020 Global Forecast Trimmed from 3.4% to 3.3%

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Tuesday, January 21, 2020 / 09:59 AM / By FBNQuest Research / Header Image Credit: Twitter, @IMFNews

                                                                                

The IMF's latest World Economic Outlook (WEO) has trimmed its global growth forecast for this year from 3.4% to 3.3%, and penciled in 3.4% for its first projection for next year. This quarterly update has an uninspiring title (Tentative Stabilization, Sluggish Recovery?) but, more importantly, concludes that the risks to its forecasts remain tilted towards the downside but less so than in October.

 

A broad shift towards more accommodative monetary policy, along with "intermittent" good news on US-Chinese trade talks, underpin the improvement in sentiment.

                                                                                                               

The Fund says that its estimate for global growth in 2019 and its forecast for 2020 would have been 50bps lower without the monetary stimulus in place.

 

There are few revisions to the numbers on any scale to highlight. The stand-out is the cut in the figure for India for 2019 from 6.1% to 4.8%, for which the update cites a sharper-than-expected slowdown in domestic demand.

 

The projection for Nigerian growth for this year is unchanged at 2.5%, and the update has forecast the same for 2021. Nigeria rightly appears among the individual country forecasts in the WEO by virtue of its size.

 

We have to say, however, that much of the commentary and policy advice is of little relevance to it. An example is the exhortation for EMs to make growth more inclusive by boosting expenditure on health and education. Nigeria would if it could but it can't.

 

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

 

2019E

2020F

2021F

World

2.9

3.3

3.4

US

2.3

2

1.7

Eurozone

1.2

1.3

1.4

Japan

1

0.7

0.5

Brazil

1.2

2.2

2.3

Russia

1.1

1.9

2

India

4.8

5.8

6.5

China

6.1

6

5.8

SSA

3.3

3.5

3.5

Nigeria

2.3

2.5

2.5

South Africa

0.4

0.8

1

 

Sources: IMF, World Economic Outlook Update, January 2020; FBNQuest Capital Research

 

The assumptions, based on the futures markets, for the Fund's basket of three crude blends (including UK Brent) are now declines of -4.3% this year to US$58.0/b and of -4.7% for 2021 to US$55.3/b. The number for 2020 compares with our forecast of an average of US$68.0/b for Bonny Light.

 

Download Here - World Economic Outlook, January 2020

 

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