- Policy efforts from countries to drive recovery amid pandemic
The International Monetary Fund (IMF) has maintained that Nigeria continues to hold the prospects of growing its gross domestic products (GDP) at 2.5 percent this year and 2.6 percent in 2022.
In its July World Economic Forecast titled, ‘Fault Lines Widen in the Global Recovery’, the IMF kept the 2021 forecast for Nigeria, which it had earlier raised from the 1.5 percent it predicted much earlier in the year. It also noted that the slow rollout of vaccines was the main factor weighing on the recovery for Low-Income Developing Countries (LIDCs) which Nigeria is part of.
On the global scene, the IMF put its growth forecast at six percent for 2021, also unchanged from the previous outlook, but the composition has changed. Growth prospects for advanced economies this year have improved by 0.5 percentage points, but this is offset exactly by a downward revision for emerging markets and developing economies driven by a significant downgrade for emerging Asia. For 2022, the IMF projects global growth of 4.9 percent, up from its previous forecast of 4.4 percent. It said that underlying this is a sizable upgrade for advanced economies, and a more modest one for emerging markets and developing economies.
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“We estimate the pandemic has reduced per capita incomes in advanced economies by 2.8 percent a year, relative to pre-pandemic trends over 2020-2022, and compared with an annual per capita loss of 6.3 percent a year for emerging market and developing economies (excluding China).
“These revisions reflect to an important extent differences in pandemic developments as the delta variant takes over. Close to 40 percent of the population in advanced economies has been fully vaccinated, compared with 11 percent in emerging market economies, and a tiny fraction in low-income developing countries. Faster-than-expected vaccination rates and return to normalcy have led to upgrades, while lack of access to vaccines and renewed waves of COVID-19 cases in some countries, notably India, have led to downgrades,” it said.
The Bretton Woods financial institution further asserted that recovery across the globe could be deterred by pandemic, though multilateral action is needed to ensure rapid, worldwide access to vaccines, diagnostics, and therapeutics, noting that this would save countless lives, prevent new variants from emerging, and add trillions of dollars to global economic growth.
“The recovery is not assured until the pandemic is beaten back globally. Concerted, well-directed policy actions at the multilateral and national levels can make the difference between a future where all economies experience durable recoveries or one where divergences intensify, the poor get poorer, and social unrest and geopolitical tensions grow,” said the IMF.
However, the fund advised on the policy efforts at national level which should continue to be tailored to reinforce multilateral efforts for securing the recovery. First, to escape the acute crisis it advised prioritizing health spending, including for vaccinations, and targeted support for affected households and firms; while to secure the recovery, more emphasis on broader fiscal and monetary support, depending on available space, including remedial measures to reverse the loss in education, and supporting the reallocation of labour and capital to growing sectors through targeted hiring subsidies and efficient bankruptcy resolution mechanisms; and to invest in the future, by advancing long-term goals of boosting productive capacity, accelerating the transition to lower carbon dependence, harnessing the benefits of digitalization, and ensuring the gains are equitably shared.
The IMF also highlighted that fiscal actions should be nested within a credible medium-term fiscal framework to ensure debt remains sustainable. However, low income developing countries will also need strong international support, it said, adding that central banks should avoid prematurely tightening policies when faced with transitory inflation pressures, but should be prepared to move quickly if inflation expectations show signs of de-anchoring.
Emerging markets are advised to also prepare for possibly tighter external financial conditions by lengthening debt maturities where possible and limiting the buildup of unhedged foreign currency debt.