January 6, 2020/Cowry Asset

International Monetary Fund projects global output to grow by 3.4% in 2020, higher than 3.0% forecast for 2019. The Bretton Woods institution predicated its global growth forecast on increased output in emerging and developing economies, especially in Asia and Europe, which are currently witnessing strong domestic demand and rising wages amid monetary and fiscal stimuli. This is in spite of the ongoing global trade tensions, especially between the U.S. and China as well as economic and trade uncertainties over the Brexit saga – in deed, the IMF projects slower growth rates for U.S. and Chinese economies of 2.1% and 5.8% respectively in 2020 (from 2.4% and 6.1% projected for 2019). 

We believe the monetary authority will remain aligned with the fiscal authority’s economic growth objective by seeking to create and sustain conditions that will boost liquidity in the financial system in order to drive down interest rates to single digit. Thus, we expect interest rates to remain suppressed in 2020. In a complementary move, we suspect the Monetary Policy Rate may be adjusted downwards from 13.50% to 13% in order to further signal its expansionary monetary policy regime.

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