The International Monetary Fund (IMF) has revised Sub-Saharan Africa’s economic growth downward by 0.1 percentage point to 3.7 per cent in 2024, according to its latest economic outlook report released today, July 16, 2024.
The IMF said this is mainly as a result of a 0.2 percentage point downward revision to the growth outlook in Nigeria amid weaker than expected activity in the first quarter of this year.
Nigeria is the leading economy in Africa due to its large population, vast oil reserves, and diverse economic sectors.
Nigeria's gross domestic product (GDP) grew by 2.98 per cent in real terms in the first quarter of 2024, lower than the fourth quarter of 2023 growth of 3.46 per cent, according to the country’s National Bureau of Statistics.
Nigeria’s slow growth in quarter one (Q1) 2024 is due to a slowdown in oil sector growth. The oil sector growth decreased by 6.41 per cent in Q1 2024 compared to Q4 2023, which was 12.11 per cent.
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Global outlook
In its latest update, the IMF projects the global economy to remain stable at 3.2 per cent in 2024 and 3.3 per cent in line with its April 2024 forecast.
"Economic activity has shown resilience through early 2024, supported by robust private consumption in key economies,” said Jean-Marc Natal, Deputy Chief of the World Economic Studies Division in the Research Department of the IMF.
"That said, the momentum of global disinflation is slowing due to persistent services inflation,” he added, implying that while prices for goods might be stabilising or decreasing, the ongoing increase in service prices is preventing a more rapid decline in overall inflation.
According to the IMF, the risk of elevated inflation has raised the prospects of higher-for-even-longer interest rates, which in turn increases external, fiscal, and financial risks.
"Overall, risk to the outlook remains balanced, but near-term risks have become more prominent. Upside risk to inflation stemmed from a lack of progress on services disinflation, renewed trade tensions, and geopolitical uncertainties,” Natal noted.
These risks, he added, may result in higher for even longer interest rates, which in turn increases external fiscal and financial risks, cautioning that significant swings in economic policy around elections could lead to fiscal slippages and heightened protectionism.
"By contrast, policies that promote multilateralism and a faster implementation of structural reforms could boost supply gains, productivity and growth with positive spillovers worldwide,” he observed.
IMF economists advised that policymakers must act now to revitalise declining medium-term growth prospects, suggesting that the priority for policymakers should be to restore price stability and address the legacies of recent crises.
At the same time, they recommended that central banks should be cautious about easing policies too early and remain open to further tightening if necessary.
"Where inflation data signal a durable return to stability, gradual monetary easing should proceed. This will also provide room for required fiscal consolidation,” Natal said.
Natal also explained that fiscal policy should focus on rebuilding buffers, ensuring debt sustainability, and making room for priority investments.
He echoed calls from different economists that strengthening multilateral cooperation and reducing trade distorting measures is vital to address global challenges and promote sustainable growth.
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The IMF said that a number of central banks in emerging market economies remain cautious about cutting interest rates because it might weaken their currencies and make their economies more vulnerable to global economic shocks.
In Rwanda, the National Bank of Rwanda (BNR) has been taking a cautious approach towards interest rates. In May, BNR lowered its key interest rate by 50 basis points to 7 per cent.
The development came after two monetary policy meetings at which the Central Bank Rate had remained unchanged.