Published: Thu, October 11, 2018
Economy | By

Downside risks to economy

Downside risks to economy

The IMF had in its World Economic Outlook report in July projected that Nigeria's economy would grow by 2.1 per cent in 2018 and 2.3 per cent in 2019.

Pakistan's previous government had set a growth rate target of 6.2 percent for the current fiscal year but worldwide and local institutions predict that the country will not be able to achieve this.

At a news conference at the International Monetary Fund and World Bank annual meetings in Bali, Obstfeld said Pakistan is facing financing gaps as it has been hit by a large fiscal and current account deficit, a low level of reserves and a currency he described as "too rigid" and over-valued.

The outlook for world trade overall also darkened: The fund expects global trade to grow 4.2 percent this year, down from 5.2 percent in 2017 and from the 4.8 percent it expected in July.

It predicted 2.9 percent US growth this year, dropping to 2.5 percent next year, and to 1.8 percent in 2020, as the effect of USA tax cuts wears off and the trade war with China inhibits growth.

India's medium-term growth prospects remain strong at 7.75 per cent, benefiting from ongoing structural reform.

The report analysed China's public balance sheet and found that its general government net financial worth has deteriorated in recent years to about 8 per cent of GDP, largely because of subnational borrowing and underperforming public corporations.


Broadly speaking, global financial conditions remain accommodative and supportive of near-term growth, albeit somewhat tighter than six months ago.

The Federal Reserve, the US central bank, has raised short-term USA rates three times this year as the American economy gains strength more than nine years after the end of the Great Recession.

Also on Tuesday, it projected that inflation in Nigeria would increase to 13.5 per cent next year.

International Monetary Fund said current account deficit would continue to rise to 5.9 percent of GDP during the current year as against 4.1 percent during the last year, but it is likely to come down to 5.3 percent in the next years. The reserve requirement ratio (RRR) was cut by a full percentage point, effective Octover 15, injecting a net 750 billion yuan (US$109.2 billion) in cash into the banking system.

It added, "A high interest burden and risks from rising yields also require continued focus on debt reduction to establish policy credibility and build buffers. These efforts should be supported by further reductions in subsidies and enhanced compliance with the Goods and Services Tax".

The report said trade tensions and the associated rise in policy uncertainty "could dent business and financial market sentiment, trigger financial market volatility, and slow investment and trade".

The report says that outflows could hit $100bn (£76.4bn) over a year, about 0.6% of emerging market economies' gross national income.

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