The International Monetary Fund (IMF) has revised downward Nigeria’s economic growth projection by 0.2 percentage point amid weaker than expected activity in the first quarter of the year.
The Nigeria’s growth forecast was revised downward by 0.2 from the earlier projection in April.
This in turn has led to a downward revision of economic growth for sub-Saharan Africa.
The IMF announced this development in its World Economic Outlook (WEO) update released on Tuesday.
The report read: “The forecast for growth in sub-Saharan Africa is revised downward, mainly as a result of a 0.2 percentage point downward revision to the growth outlook in Nigeria amid weaker than expected activity in the first quarter of this year.”
The Bretton Wood institution raised alarm that some near-term risks have gained prominence from the previous outlook.
It added: “Overall, risks to the outlook remain balanced, as in the April 2024 WEO, but some near-term risks have gained prominence. These include upside risks to inflation that stem from a lack of progress on services disinflation and price pressures emanating from renewed trade or geopolitical tensions.
“Risks of persistent inflation in the services sector are tied to both wage and price setting, given that labor accounts for a high share of the costs in that sector. Higher nominal wage growth, which in some cases reflects the catch-up of real wages, if accompanied by weak productivity, could make it difficult for firms to moderate price increases, especially when profit margins are already squeezed.
“This could lead to further stickiness in wage and price inflation. The escalation of trade tensions could further raise near-term risks to inflation by increasing the cost of imported goods along the supply chain.
“Bumpiness along the remaining disinflation path could destabilize the return to price stability if short-term expectations spike upward as a result of disappointing inflation data.”
IMF equally held its global growth expectations for 2024.
The Fund expects the world economy to grow 3.2 percent this year, unchanged from its April forecast.
“Global activity and world trade firmed up at the turn of the year, with trade spurred by strong exports from Asia, particularly in the technology sector,” it stated.
For 2025, it expects global growth of 3.3 percent.
The Washington-based lender also warned that the prospect of interest rates staying elevated longer in the face of escalating trade tensions and increased policy uncertainty.
