Nigeria: IMF Revises Nigeria's 2021 GDP Forecasts to 1.5%

27 January 2021

Lagos — The International Monetary Fund (IMF) in its World Economic Outlook (WEO) update released yesterday has projected that the Nigerian economy will grow by 1.5 per cent this year, slightly lower than the 1.7 per cent it had predicted for the country in its previous forecast.

The multilateral institution, in its latest WEO titled: 'Policy Support and Vaccines Expected to Lift Activity,' however, predicted that in sub-Saharan Africa, growth will strengthen to 3.2 per cent in 2021 and 3.9 per cent in 2022.

It also expected oil prices to average above $50 per barrel in 2021, a more than 21 per cent rise from 2020's depressed level on the back of the rollout of vaccines and fiscal stimulus programmes.

IMF stated that the updated version of the report was reviewed in line with emergence of a new variant of coronavirus, which poses as a concern for global recovery.

On its revised projections, the report stated: "Although recent vaccine approvals have raised hopes of a turnaround in the pandemic later this year, renewed waves and new variants of the virus pose concerns for the outlook. Amid exceptional uncertainty, the global economy is projected to grow 5.5 percent in 2021 and 4.2 percent in 2022. The 2021 forecast is revised up 0.3 percentage point relative to the previous forecast, reflecting expectations of a vaccine-powered strengthening of activity later in the year and additional policy support in a few large economies."

Speaking at the virtual unveil of the WEO report, Economic Counselor and Director of the Research Department, Ms. Gita Gopinath, said as much as 90 million people worldwide would fall below poverty bracket and also urged low income and emerging economies to hasten COVID-19 vaccination.

She said: "Oil exporters and tourism-dependent economies are particularly hard hit and their prospects are severe given that oil prices have a subdued outlook and cross border travel is not expected to resume anytime soon.

"Even within countries, the burden of the crisis has been felt unequally across different groups. Workers with less education, youth and women have suffered disproportionate income losses. 90 million individuals are expected to enter extreme poverty over 2020/2021 reversing the trends of the past two decades."

She called for more support to fund African countries' purchase of vaccines.

"But there are many countries that are waiting till 2022 for that to happen and that is just costly for everybody not just for developing countries, it is also very costly for countries that have the vaccines. Which is why we are calling for greater funding for making sure these vaccines are available to poor nations."

IMF Projects 21% Rebound in Crude Oil Prices

Oil prices will average above $50 per barrel in 2021, a more than 21 per cent rise from 2020's depressed level on the back of the rollout of vaccines and fiscal stimulus programmes, the IMF has said in an updated forecast.

The IMF now expects global Gross Domestic Product (GDP) to grow 5.5 per cent in 2021, after a 3.5 per cent contraction in 2020, with the 2020 figure revised up 0.9 percentage point from the previous forecast issued in October while the 2021 estimate is a 0.3 percentage point upward revision.

S&P Global Platts quoted the IMF as forecasting that advanced economies are projected to recover more quickly than developing countries due to quicker access to vaccines and broader fiscal measures.

"Oil exporters and tourism-based economies face particularly difficult prospects given the subdued outlook for oil prices and expected slow normalisation of cross-border travel," it said.

The IMF uses a simple average of prices of Brent, Dubai and WTI to calculate its oil prices. With that methodology, the IMF said oil prices averaged $41.29/b in 2020 and would rise to $50.03/b in 2021, before falling back to $48.82/b in 2022.

The October forecast had estimated that oil prices would average $46.70/b in 2021.

"Non-oil commodity prices are also expected to increase with those of metals, in particular, projected to accelerate strongly in 2021," the IMF said.

The fund said its forecasts were subject to uncertainty, with the pandemic yet to be contained.

Meanwhile, Barclays has lifted its view on the average Brent Crude price for this year by $2 per barrel, expecting it at $55.

The bank also expects WTI Crude, to average $52 per barrel in 2021, raising its outlook by $2 a barrel due to a weaker U.S. dollar and expected higher demand for winter fuels because of the cold snap in the northern hemisphere.

The new forecasts are roughly the levels at which both benchmarks traded early on Monday, with WTI Crude at just above $52, and Brent Crude at $55.80.

The bank projected a more bullish oil prices in the second half of this year, while for the first half, it still sees downside risks such as expanding Chinese lockdowns to fight resurging COVID cases.

"The COVID-19 shock, despite its acute effects on mobility demand, does not appear, at least for now, to have materially affected the oil supply-demand continuum," Barclays said.

Transportation demand for oil is set to normalise by the end of this year, thanks to vaccinations and freight demand with fiscal stimuli around the world, according to the bank.

The Organisation of Petroleum Exporting Countries (OPEC) and its allies OPEC+ group is forecasted to ease the cuts by 1.5 million barrels per day (bpd) in total during the second quarter of the year while the alliance is also expected to release another 1.5 million bpd of oil on the market in the second half of 2021, Barclays said.

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