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IMF / World Economic Outlook 2022 Soundbites

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IMF global - Investors King

Global growth prospects have worsened significantly due to the combined effects of inflation, war in Ukraine and lingering pandemic, the IMF announced on Tuesday (April 19).

Those impacts are outlined in the World Economic Outlook report, released at the beginning of the Spring Meetings of the IMF and World Bank in Washington, DC by new chief economist, Pierre-Olivier Gourinchas.

“Well, there is a significant downgrade to our growth projections for the global economy from 4.4 percent as of January to 3.6 percent in our latest update. 0.8 percentage point difference. There are three main reasons for this downgrade. First, the war invasion of Ukraine by Russia, which is increasing energy and commodity prices around the world and is leading to less output and more inflation.

“Inflation is higher in most countries and is expected to persist longer. In addition, we have a slowdown of the Chinese economy with more frequent lockdowns due to Omicron that is weighing down and then also elevated price pressures in many parts of the world or leading central banks to tighten monetary policy controls.” Said Pierre-Olivier Gourinchas, IMF’s Chief Economist.

Overall risks to economic prospects have risen sharply and policy trade-offs have become ever more challenging.

Well, there are a number of important downside risks to our forecast. First, let me start with the war itself. The conflict could escalate, the sanctions could become broader, and this is clearly that would weigh down on economic activity. Second, inflation pressures are building up. Some countries, like the US, inflation is at the highest level in 40 years.

“There is a risk that this could persist and would call for more forceful action by central banks that would weigh down on output and economic activity. Third, the COVID 19 pandemic is still with us. We could see the emergence of new variants that are resistant to vaccines that would cause more lockdowns and disrupt global supply chains. Fourth, we could have in the context of tightening policy rates around the world, we could see also more financial instability. Many countries might find that capital flows out, currencies could start depreciating. This financial instability is another factor. Lastly, we have also the potential for social unrest given the increase in energy and food prices in many countries,” added Gourinchas.

Even as policymakers focus on cushioning the impact of the war and the pandemic, attention will need to be maintained on longer-term goals.

Well, our advice to policymakers is first, do everything we can to end the war now. Beyond that, we can think about monetary policy, fiscal policy and health policy. For monetary policy, central banks need to act decisively to make sure that inflation expectations remain well anchored and not drifting away from central bank targets. At the same time, they need to act in a nimble and data dependent way to support growth and make sure that the hiking cycle that should happen is not going to be disruptive.

“On fiscal policy, the trade off is different. It’s between rebuilding fiscal buffers on the one hand and protecting vulnerable populations that have been hit by the increase in energy and food prices. So our advice is first. In countries where the health situation allows, withdraw the support that was put in place in the last two years, then to address vulnerable populations, implement targeted and temporary policies that will help them face higher prices for food and energy.

“This can take different forms, in the form of utility bill discounts, in the form of subsidies for food and energy prices as long as they are temporary and there are clear sunset clauses, and that all of these policies are inscribed in fiscal frameworks, medium term fiscal frameworks so as to ensure fiscal sustainability.

“Finally, on health policy, we need to implement a comprehensive toolkit with monitoring, tests, vaccines and treatments to make sure that all countries can emerge from the COVID 19 pandemic. And this will also require international donors to complete the funding for the international tools that we put in place with funding needs that are around $23.4 billion,” said Gourinchas.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Economy

IMF Report: Nigeria’s Inflation to Dip to 26.3% in 2024, Growth Expected at 3.3%

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Nigeria’s economic outlook for 2024 appears cautiously optimistic with projections indicating a potential decrease in the country’s inflation rate alongside moderate economic growth.

The IMF’s revised Global Economic Outlook for 2024 highlights key forecasts for Nigeria’s economic landscape and gave insights into both inflationary trends and GDP expansion.

According to the IMF report, Nigeria’s inflation rate is projected to decline to 26.3% by the end of 2024.

This projection aligns with expectations of a gradual easing of inflationary pressures within the country, although challenges such as fuel subsidy removal and exchange rate fluctuations continue to pose significant hurdles to price stability.

In tandem with the inflation forecast, the IMF also predicts a modest economic growth rate of 3.3% for Nigeria in 2024.

This growth projection reflects a cautious optimism regarding the country’s economic recovery and resilience in the face of various internal and external challenges.

Despite the ongoing efforts to stabilize the foreign exchange market and address macroeconomic imbalances, the IMF underscores the need for continued policy reforms and prudent fiscal management to sustain growth momentum.

The IMF report provides valuable insights into Nigeria’s economic trajectory, offering policymakers, investors, and stakeholders a comprehensive understanding of the country’s macroeconomic dynamics.

While the projected decline in inflation and modest growth outlook offer reasons for cautious optimism, it remains essential for Nigerian authorities to remain vigilant and proactive in addressing underlying structural vulnerabilities and promoting inclusive economic development.

As the country navigates through a challenging economic landscape, concerted efforts towards policy coordination, investment promotion, and structural reforms will be crucial in unlocking Nigeria’s full growth potential and fostering long-term prosperity.

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Economy

South Africa’s March Inflation Hits Two-Month Low Amid Economic Uncertainty

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South Africa's economy - Investors King

South Africa’s inflation rate declined to a two-month low, according to data released by Statistics South Africa.

Consumer prices rose by 5.3% year-on-year, down from 5.6% in February. While this decline may initially suggest a positive trend, analysts caution against premature optimism due to various economic factors at play.

The weakening of the South African rand against the dollar, coupled with drought conditions affecting staple crops like white corn and geopolitical tensions in the Middle East leading to rising oil prices, poses significant challenges.

These factors are expected to keep inflation relatively high and stubborn in the coming months, making policymakers hesitant to adjust borrowing costs.

Lesetja Kganyago, Governor of the South African Reserve Bank, reiterated the bank’s cautious stance on inflation pressures.

Despite the recent easing, inflation has consistently remained above the midpoint of the central bank’s target range of 3-6% since May 2021. Consequently, the bank has maintained the benchmark interest rate at 8.25% for nearly a year, aiming to anchor inflation expectations.

While some traders speculate on potential interest rate hikes, forward-rate agreements indicate a low likelihood of such a move at the upcoming monetary policy committee meeting.

The yield on 10-year bonds also saw a marginal decline following the release of the inflation data.

March’s inflation decline was mainly attributed to lower prices in miscellaneous goods and services, education, health, and housing and utilities.

However, core inflation, which excludes volatile food and energy costs, remained relatively steady at 4.9%.

Overall, South Africa’s inflation trajectory underscores the delicate balance between economic recovery and inflation containment amid ongoing global uncertainties.

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Economy

Discontent Among Electricity Consumers as Band A Prioritization Leads to Supply Shortages

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In Nigeria, discontent among electricity consumers is brewing as Band A prioritization by distribution companies (DisCos) exacerbates supply shortages for consumers in lower tariff bands.

The move follows the Nigerian Electricity Regulatory Commission’s (NERC) decision to increase tariffs for customers in Band A, prompting DisCos to focus on meeting the needs of Band A customers to avoid sanctions.

Band A customers, who typically receive 20 to 24 hours of electricity supply daily, are now benefiting at the expense of consumers in Bands C, D, and E, who experience significant reductions in power supply.

The situation has ignited frustration among these consumers, who feel marginalized and neglected by DisCos.

Daily Trust investigations reveal that many consumers in lower tariff bands are experiencing prolonged power outages, despite their expectations of a minimum supply duration.

Residents like Christy Emmanuel from Lugbe, Abuja, and Damilola Akanbi from Life Camp are lamenting receiving less than the promised hours of electricity, rendering it ineffective for their daily needs.

Adding to the challenge is the low electricity generation, forcing DisCos to ration power across the grid.

As of recent records, only 3,265 megawatts were available, leading to further difficulties in meeting the demands of all consumers.

The prioritization of Band A customers has been confirmed by officials from DisCos, citing directives from the government to avoid sanctions from NERC.

An anonymous official from the Kaduna Electricity Distribution Company highlighted the pressure from the government to ensure Band A customers receive the required supply, even if it means neglecting other bands.

Meanwhile, the Transmission Company of Nigeria (TCN) has denied reports blaming it for power shortages to Band A customers. General Manager Ndidi Mbah clarified that recent outages were due to technical faults and adverse weather conditions, outside of TCN’s control.

Experts have criticized the DisCos’ prioritization strategy, arguing that it neglects the needs of consumers in lower tariff bands. Bode Fadipe, CEO of Sage Consulting & Communications, emphasized that DisCos cannot ignore the financial contributions from these bands, which sustain the sector.

Chinedu Amah, founder of Spark Nigeria, urged for optimized supply across all bands, emphasizing the importance of improving service levels for all consumers.

As discontent grows among electricity consumers, calls for fair distribution of power and equitable treatment from DisCos are gaining momentum.

The situation underscores the need for regulatory intervention to address the concerns of all stakeholders and ensure a balanced approach to electricity distribution in Nigeria

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