August 2, 2021/CSL Research

According to the recently published World Economic Outlook (WEO) by the International Monetary Fund (IMF), economic prospects across countries have diverged further since the April 2021 forecast with vaccine access as the principal fault line. As a result, some economies will experience further normalization of activities in the year and those that will still face resurgent infections and rising COVID death tolls. The organization maintained its global growth forecast at 6% in 2021 but with offsetting changes while revising its 2022’s growth forecast to 4.9%. The 2022 new forecast is 0.5ppts higher than April’s forecast of 4.5%, supported by forecast upgrade for advanced economies, particularly the United States (US).

Across economic classifications, Advanced Economies (AEs) are projected to grow at 5.6% in 2021, an improvement from 5.1% in April’s forecast due to pandemic developments and changes in policy support. In 2022, IMF estimated recovery for the AEs at 4.4%, 0.8ppts higher than April’s forecast of 3.6%. For Emerging Markets and Developing Economies (EMDEs), growth of 6.3% is projected for 2021, 0.4ppts lower than April’s forecast of 6.7%. However, growth of 5.2% is forecasted for 2022, 0.2ppts higher than April’s forecast of 5.0%.

The international financial institution hinged the revisions to global GDP growth forecasts on the pace of vaccine rollouts amidst the increased transmissibility of the virus and the fiscal support put in place to stimulate economic growth. Countries with fair distribution of vaccines and agile fiscal policies are likely to witness a much better-anticipated recovery than those with the inequitable rollout of vaccines, resulting in an uneven global recovery.

Although, the resurgence of the virus remains the downside risk to projections made. Also,
tightened monetary policies by many central banks could form a clog in the wheel of economic recovery, thus maligning inclusive growth. Specifically for Nigeria, the outlook for 2021 remains stable, with GDP to rise by 2.5% (slightly above our estimate of 2.4%) and 2.6% in 2022 (below our estimate of 2.9%). In our view, we premise the stable outlook on the rebound in crude oil prices, given the country’s dependence on oil, coupled with the gradual recovery in the non-oil sectors.