IMF Downgrades Nigeria’s 2024 Economic Growth Forecast To 2.9%

LAGOS – The International Monetary Fund (IMF) has lowered its 2024 growth forecast for Nigeria’s economy to 2.9%, attributing the downgrade to weaker-than-ex­pected economic activity in the first half of the year.

This was revealed in the IMF’s October 2024 World Eco­nomic Outlook (WEO), released during the ongoing annual meet­ings of the World Bank and IMF.

The revised forecast rep­resents a 0.2 percentage point decrease from the 3.1% growth forecast projected in the July 2024 WEO.

 However, the IMF slightly raised its forecast for Nigeria’s economic growth in 2025, project­ing a growth rate of 3.2%, up from 3.0% in the July report.

Similarly, the IMF reduced its 2024 growth forecast for sub-Sa­haran Africa to 3.6%, down from 3.7% in July. However, it raised the region’s 2025 growth forecast to 4.2%, up from 4.1%.

“In sub-Saharan Africa, GDP growth is projected to increase from an estimated 3.6% in 2023 to 4.2% in 2025, as the adverse impacts of prior weather shocks abate and supply constraints gradually ease,” the IMF stated.

The report noted that the downgrade for sub-Saharan Africa reflects slower growth in Nigeria, amid weaker-than-ex­pected activity in the first half of 2024. Additionally, ongoing conflict in South Sudan has led to a significant 26% contraction in its economy.

Global growth is expected to remain stable yet underwhelm­ing. At 3.2 percent in 2024 and 2025, the growth projection is virtually unchanged from those in both the July 2024 World Economic Out­look Update and the April 2024 World Economic Outlook.

However, notable revisions have taken place beneath the surface, with upgrades to the forecast for the United States off­setting downgrades to those for other advanced economies—in particular, the largest European countries.

Likewise, in emerging mar­kets and developing economies, disruptions to production and shipping of commodities—espe­cially oil—conflicts, civil unrest, and extreme weather events have led to downward revisions to the outlook for the Middle East and Central Asia and that for sub-Sa­haran Africa.

These have been compensat­ed for by upgrades to the forecast for emerging Asia, where surging demand for semiconductors and electronics, driven by significant investments in artificial intelli­gence, has bolstered growth.

The latest forecast for global growth five years from now––at 3.1 percent—remains mediocre compared with the pre-pandem­ic average. Persistent structural headwinds—such as population aging and weak productivity— are holding back potential growth in many economies.

Cyclical imbalances have eased since the beginning of the year, leading to a better alignment of economic activity with poten­tial output in major economies.

This adjustment is bringing inflation rates across countries closer together and on balance has contributed to lower global inflation.

Global headline inflation is expected to fall from an annual average of 6.7 percent in 2023 to 5.8 percent in 2024 and 4.3 percent in 2025, with advanced economies returning to their inflation tar­gets sooner than emerging mar­ket and developing economies.

As global disinflation contin­ues to progress, broadly in line with the baseline, bumps on the road to price stability are still possible.

The IMF also added that goods prices have stabilised, but services price inflation remains elevated in many regions, point­ing to the importance of under­standing sectoral dynamics and of calibrating monetary policy accordingly.

“Risks to the global outlook are tilted to the downside amid elevated policy uncertainty. Sud­den eruptions in financial mar­ket volatility—as experienced in early August—could tighten financial conditions and weigh on investment and growth, espe­cially in developing economies in which large near-term external fi­nancing needs may trigger capital outflows and debt distress.

“Further disruptions to the disinflation process, potentially triggered by new spikes in com­modity prices amid persistent geopolitical tensions, could pre­vent central banks from easing monetary policy, which would pose significant challenges to fis­cal policy and financial stability.

“Deeper- or longer-than-ex­pected contraction in China’s property sector, especially if it leads to financial instability, could weaken consumer sentiment and generate negative global spillovers given China’s large footprint in global trade.

“An intensification of protec­tionist policies would exacerbate trade tensions, reduce market efficiency, and further disrupt supply chains.

“Rising social tensions could prompt social unrest, hurting consumer and investor confi­dence and potentially delaying the passage and implementation of necessary structural reforms.

“As cyclical imbalances in the global economy wane, near-term policy priorities should be careful­ly calibrated to ensure a smooth landing.

“In many countries, shifting gears on fiscal policy is urgently needed to ensure that public debt is on a sustainable path and to rebuild fiscal buffers; the pace of adjustment should be tailored to country-specific circumstances.

“Structural reforms are neces­sary to lift medium-term growth prospects, but support for the most vulnerable should be main­tained”, the fund added.