By Ademola Alawiye

Friday, 21 Jan 2011

Financial analysts have projected a slow growth in the economies of Nigeria and developing countries in 2011.

According to a review of the world economy by analysts at the First Security Discount House, growth in both high-income and developing countries are unlikely to be fast enough to eliminate unemployment in those countries, especially in the economies that were hardly hit by the global financial crisis.

The report said, “Growth in both high-income and developing countries is expected to slow somewhat in 2011, mainly reflecting the easing already observed in the second half of 2010, before picking up again toward mid-2011, settling at rates close to their longer-run potential.”

It added that the World Bank 2011 Edition of Global Economic Prospects Report, titled, “Navigating Strong Currents”, stated that Global Gross Domestic Product was projected to increase by 3.3 per cent and 3.6 per cent in 2011 and 2012.

The report, however, noted that the developing economies would expand by six per cent or more in each year, but that would not eliminate unemployment.

It said, “Despite the robust growth, the growth rates are unlikely to be fast enough to eliminate unemployment in the hardest-hit economies and economic sectors. The developing countries face three main short-term risks which are – tensions in European financial markets, large and volatile capital flows and a rise in high food prices.”

Justifying the potential risks, it said full-scale financial turmoil, while viewed as unlikely, could threaten recovery in Nigeria and other developing countries, as well as developed nations.

The report said, “Capital flows to developing nations picked up in 2010 in part because of persistent interest rates in certain high-income countries led investors to seek higher yield in developing countries. Net international equity and bond flows to developing countries rose sharply in 2010, rising by 42 per cent and 30 per cent respectively.

“Foreign direct investment to developing countries rose by 16 per cent in 2010, reaching N410bn after falling 40 per cent in 2009. The overall capital flows trend is a positive development, but unless such flows are well managed, they can destabilise movements in exchange rates, commodity prices and asset prices.”

The analysts said the Nigerian economy had the capacity to grow in double digit if power and inadequate transportation problems that currently plagued the country could be resolved.

They stressed that policy makers and economic managers should ensure that the impressive growth translated to tangible improvement in the standard of living of the citizenry.

Source: Punch