…Nigeria to see -3.4 growth
As most economies in the world continue to be on lockdown in the battle against Coronavirus, the World Bank has predicted a -3 negative growth, a downgrade of 6.3 percentage points from January 2020, making it the biggest recession in close to a century.
According to the World Economic Outlook released by the International Monetary Fund the Great Lockdown would be the worst recession since the Great Depression, and far worse than the Global Financial Crisis as it puts the cumulative loss to global GDP over 2020 and 2021 from the pandemic crisis could be around N9 trillion, greater than the economies of Japan and Germany, combined.
Economies in Sub-saharan Afriaca are expected to commonly see record a -1.6 per cent negative growth in 2020 and recover by 2021 whole Nigeria and South Africa are expected to record -3.4 and -5.8 per cents negative growth in 2020.
Economic counsellor and director of the Research Department at the IMF, Gita Gopinath noted that under the assumption that the pandemic and required containment peaks in the second quarter for most countries in the world, and recedes in the second half of this year, “in the April World Economic Outlook we project global growth in 2020 to fall to -3 percent. This is a downgrade of 6.3 percentage points from January 2020, a major revision over a very short period.
“Assuming the pandemic fades in the second half of 2020 and that policy actions taken around the world are effective in preventing widespread firm bankruptcies, extended job losses, and system-wide financial strains, we project global growth in 2021 to rebound to 5.8 percent. This recovery in 2021 is only partial as the level of economic activity is projected to remain below the level we had projected for 2021, before the virus hit.
“This is a truly global crisis as no country is spared. Countries reliant on tourism, travel, hospitality, and entertainment for their growth are experiencing particularly large disruptions. Emerging market and developing economies face additional challenges with unprecedented reversals in capital flows as global risk appetite wanes, and currency pressures, while coping with weaker health systems, and more limited fiscal space to provide support. Moreover, several economies entered this crisis in a vulnerable state with sluggish growth and high debt levels.
“For the first time since the Great Depression both advanced economies and emerging market and developing economies are in recession. For this year, growth in advanced economies is projected at -6.1 percent. Emerging market and developing economies with normal growth levels well above advanced economies are also projected to have negative growth rates of -1.0 percent in 2020, and -2.2 percent if you exclude China. Income per capita is projected to shrink for over 170 countries. Both advanced and emerging market and developing economies are expected to partially recover in 2021.
While the economy is shut down, policymakers will need to ensure that people are able to meet their needs and that businesses can pick up once the acute phases of the pandemic pass. The large, timely, and targeted, fiscal, monetary, and financial policies already taken by many policymakers—including credit guarantees, liquidity facilities, loan forbearance, expanded unemployment insurance, enhanced benefits, and tax relief—have been lifelines to households and businesses. This support should continue throughout the containment phase to minimize persistent scars that could emerge from subdued investment and job losses in this severe downturn.
Policymakers must also plan for the recovery. As containment measures come off, policies should shift swiftly to supporting demand, incentivizing firm hiring, and repairing balance sheets in the private and public sector to aid the recovery. Fiscal stimulus that is coordinated across countries with fiscal space will magnify the benefit for all economies. Moratoria on debt repayments and debt restructuring may need to be continued during the recovery phase.