The International Monetary Fund has cut its 2017 economic growth forecast for Nigeria.
The Washington-based lender said in its World Economic Outlook Report on Tuesday that Nigeria’s economy would contract by 1.7 per cent this year and expand 0.6 per cent in 2017, less than the 1.1 per cent the IMF had earlier predicted.
Giving its forecast for Africa’s two largest economies, the fund said the Gross Domestic Product in South Africa would probably expand by 0.8 per cent next year, compared with one per cent it predicted in July.
The two nations make up more than half of the sub-Sahara Africa GDP.
According to the IMF, low commodity prices, policy uncertainty and weak investor confidence weigh on output of the two economies.
The fall in global commodity prices has hindered economic growth of the continent’s biggest producers of oil and minerals such as platinum and gold, and led to a slump in foreign-currency earnings, according to Reuters.
The IMF said that in Nigeria, electricity shortages and militant activities disrupting oil production had lowered output.
In South Africa, it said policy uncertainty was making adjustment to weaker terms of trade difficult.
The lender said: “Momentum in South Africa was flat, despite the improvements in the external environment. There will be only a modest recovery next year as the commodity and drought shocks dissipate and power supply improves.”
The Nigerian economy had contracted in the first half of the year and inflation accelerated to the highest rate in more than a decade.
Restrictive foreign exchange policies, which were dumped in June, hampered imports of manufacturing inputs and drove up consumer prices.
The cut in the growth forecast for next year reflects temporary disruptions to oil production, foreign-currency shortages due to a fall in crude receipts, lower power generation and weak investor confidence, according to the IMF.
On the global scene, the fund said economic growth would remain subdued this year following a slowdown in the United States and Britain’s vote to leave the European Union.
“Taken as a whole, the world economy has moved sideways,” the IMF’s Chief Economist and Economic Counsellor, Maurice Obstfeld, said.
“We have slightly marked down 2016 growth prospects for advanced economies while marking up those in the rest of the world,” Obstfeld added.
The report highlighted the precarious nature of the recovery, eight years after the global financial crisis.
It raised the spectre that persistent stagnation, particularly in advanced economies, could further fuel populist calls for restrictions on trade and immigration.
Obstfeld said such restrictions would hamper productivity, growth and innovation.
“It is important to defend the prospects for increasing trade integration,” Obstfeld said, adding: “Turning back the clock on trade can only deepen and prolong the world economy’s current doldrums.”