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Afrinvest Forecasts 2.5% Economic Growth in 2019

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  • Afrinvest Forecasts 2.5% Economic Growth in 2019

AFRINVEST (West Africa) Limited has predicted an improved but sluggish growth rate of 2.5 per cent for the 2019 financial period.

The firm stated this in its report titled, On the Precipice, “The Nigerian economy and financial market/ 2018 review & 2019 outlook.”

Part of the report read, “In our ‘base case’ for 2019, we do not expect a marked turnaround in the economy. We estimate that growth will improve to 2.5 per cent from 1.9 per cent in 2018 based on the expectation of improved oil GDP and sustained expansion in the non-oil sector. This forecast implies that with the population growing at 2.6-3.0 per cent, Nigerians are projected to remain poorer on the average in 2019.”

It stated that it was optimistic that a strong festive season and better agriculture output could push Nigeria past the finish line.

“Our growth expectations in 2019 is somewhat linked to the outcome of the general elections,” it added.

While modelling three scenarios to capture different effects, it stated that the “base case assumes that President Muhammadu Buhari wins the election and there is policy continuity. The optimistic case is that regardless of the winner, the government implements reforms to attract investment; and the pessimistic case assumes that political risks intensify and lead to continued violence in the Middle-Belt, North-East and the Niger-Delta.”

While noting that 2018 was a year of two distinct paths for growth, it stated that overall, the pace of growth remained slow and uneven, coming below the long-term growth rate of six to seven per cent and the pre-recession level of 2.8 per cent.

It stated, “Real GDP growth came in at 1.9 per cent in Q1:2018, below our estimate, due to a poor performance in the service sector and a slower expansion in agriculture. In Q2:2018, growth further moderated to 1.5 per cent due to both a 5.0 per cent contraction in oil output and a slump in agriculture growth to 1.2 per cent – the lowest in more than a decade.

“This slowdown in agriculture output was due to the herder-farmer conflict in the middle-belt which led to the destruction of livestock and poor harvests of crops.”

Afrinvest added that the contraction in the oil sector in Q2:2018 was mainly due to a reduction in output by 160,000b/d to 1.8mb/d.

Elsewhere, growth was not broad-based as sectors such as trade and real estate remained weak due to fragile consumer spending, it added.

Meanwhile, it stated that manufacturing growth was soft and volatile.

The report noted that, “In Q3:2018, growth came in better at 1.8 per cent but this was slower than the 2.1 per cent we expected. Oil output contracted by 2.9 per cent and agriculture growth remained weak at 1.9 per cent in Q3:2018. This prompted a revision of our forecast of FY:2018 growth to 1.9 per cent from 2.1 per cent.”

To achieve this growth target, it said, it believed the economy would expand by at least 2.6 per cent in Q4:2018.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Economy

IMF Staff Completes Virtual Mission to Lesotho

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IMF

Lesotho has been struggling with the fallout from the pandemic and a sharp decline in revenues from the Southern African Customs Union (SACU); The authorities and the mission team made significant progress in their discussions on policies that could be supported by the IMF under a financial arrangement.

A team from the International Monetary Fund (IMF), led by Mr. Aqib Aslam, conducted a series of virtual missions, most recently from September 7 to October 15, 2021, to discuss the authorities’ economic and financial program and their request for IMF financial support.

The authorities and the mission team had productive discussions on policies that could be supported by the IMF under a financial arrangement. The program under discussion would aim to support a durable post-pandemic recovery, restore fiscal sustainability, strengthen public financial management, and ensure the protection of the most vulnerable. Other key structural reforms to be implemented include strengthening governance and fostering private sector investment to spur inclusive growth and employment over the medium term.

At the end of the visit, Mr. Aslam issued the following statement:

“Lesotho has been experiencing twin economic shocks resulting from the pandemic and a decline in revenues from the Southern African Customs Union (SACU) that have proved to be highly volatile. Public expenditures have been increasing while SACU revenues were buoyant but have not adapted to their decline and the limited growth in other revenue sources. At the same time, the economy has been in recession since 2017. The resulting fiscal and external imbalances, if left unaddressed, would continue to put pressure on international reserves and lead to government payment arrears.

“Discussions emphasized the need to support a robust and inclusive post-pandemic recovery. To this end, the mission discussed with the authorities a number of options for containing the fiscal deficit to a level that is sustainable and can be fully financed. The team noted that the adjustment should be focused on expenditure measures while boosting poverty-reducing social spending to protect the most vulnerable. Complementary actions include efforts to broaden financial access and inclusion; strengthen financial supervision; modernize the legal frameworks for bank lending, business rescue, and restructuring, and digitalize payment systems.

“On the fiscal front, efforts should focus on addressing the public sector wage bill, which is one of the largest in the world compared to the size of the economy; saving on public sector and official allowances; better targeting education loans; streamlining the capital budget and initiating gender-responsive budgeting. Discussions also considered measures to modernize tax policy and improve domestic revenue mobilization. The mission noted the need to address long-standing PFM issues to ensure the provision of reliable fiscal data, the integrity of government systems, and the sound use of public resources.

“Significant progress was made during the visit, and discussions will continue in the coming weeks. If agreement is reached on policy measures in support of the reform program, an arrangement to support Lesotho’s economic program would be proposed for the IMF Executive Board’s consideration.

“The IMF team thanks the authorities for their hospitality and constructive discussions.”

The IMF mission met with Prime Minister Majoro, Minister of Finance Sophonea, Central Bank Governor Matlanyane, and other senior government officials. The team also met with representatives of the diplomatic community, private sector, civil society, and multilateral development partners.

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Economy

Nigeria’s Inflation: Prices Increase at Slower Pace in September 2021

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Consumer Confidence

Prices of goods and services moderated further in Africa’s largest economy, Nigeria in the month of September 2021, the latest report from the National Bureau of Statistics (NBS) has revealed.

Consumer Price Index (CPI), which measures the inflation rate, grew at 16.63 percent year-on-year in September, slower than the 17.01 percent rate achieved in the month of August.

On a monthly basis, inflation rose by 1.15 percent in September 2021, representing an increase of 0.13 percent from 1.02 percent filed in August 2021.

Food Index that gauges price of food items grew at 19.57 percent rate in the month, below the 20.30 percent rate recorded in August 2021.

The increase in the food index was caused by increases in prices of oils and fats, bread and cereals, food product N.E.C., fish, coffee, tea and cocoa, potatoes, yam and other tuber and milk, cheese and egg.

However, on a monthly basis, the price of food index rose by 0.20 percent from 1.06 percent filed in August 2021 to 1.26 percent in September 2021.

The more stable twelve months average ending in September 2021 revealed that prices of food items grew by 0.21 percent from 20.50 percent in August to 20.71 percent in September.

Prices of goods and services have been on the decline in Nigeria in recent months, according to the NBS. However. on masses are complaining of the persistent rise in prices of goods and services across the nation.

Some experts attributed the increase to Nigeria’s weak foreign exchange rate given it is largely an import-dependent economy.

 

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Economy

Global Debt Rises by $27 Trillion to $226 Trillion in 2020 – IMF

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IMF - Investors King

The pandemic has led to an unprecedented increase in debt—issued by governments, nonfinancial corporations, and households the IMF estimated in the latest Fiscal Monitor report. In 2020 global debt reached $226 trillion and increased by $27 trillion, the IMF estimated Wednesday  (October 13) in Washington, DC.

High and growing levels of public and private debt are associated with risks to financial stability and public finances, said Vitor Gaspar, Director of the IMF’s Fiscal Affairs Department.

“According to preliminary estimates from the Global Debt Database, global debt by governments, households, and non-financial corporations reached $226 trillion. That represents an increase of $27 trillion relative to 2019. Both the level and the pace of increase are record highs. We know that high and rising debts increase risks to financial stability and public finances,” Gaspar said ahead of the Fiscal Monitor release.

Gaspar emphasized that countries with a high credibility fiscal framework benefit from better bond market access. They also experience lower interest rates on sovereign bonds.

“A strong message from the fiscal monitor is that fiscal credibility pays off. Countries that have credible fiscal frameworks benefit from better and cheaper access to bond markets. That’s a precious asset to have in an uncertain and difficult times like COVID 19. Fiscal credibility pays off!,” added Gaspar.

He also recognized that while the international community has provided critical support to alleviate fiscal vulnerabilities in low-income countries, still more is needed.

“In 2020, the IMF’s rapid financing and the G20 Debt Service Suspension Initiative contribute to make resources available to the countries that need it the most. But more is needed. With a general allocation of SDRs of $650 billion, liquidity has been provided, but much more could be achieved if rich countries would make part of their resources available to the developing world. By doing so, donors would be contributing to fighting the pandemic and to the achievement of sustainable and inclusive growth,” said Gaspar

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