IMF: Tinubu’s Economic Reforms Pave Way for Stronger, Inclusive Growth

The International Monetary Fund (IMF) on Tuesday, October 10, said economic reforms started by President Bola Tinubu, would trigger stronger and inclusive growth for the economy.

Speaking during the presentation of World Economic Outlook at the on-going IMF/World Bank Annual Meetings in Marrakech, Morocco, the Economic Counsellor and the Director of Research of the IMF, Pierre-Olivier Gourinchas lauded the speed at which President Tinubu instituted important reforms on unified exchange rates and removal of subsidy on petrol.

He said the move would accelerate Nigeria’s economic growth projected by the fund from 3.3 per cent this year to 2.9 per cent next year, and 3.1 per cent in 2024.

He said: “There is a downward revision for this year, partly this is because of the demonetization, the high inflation, the shocks to agriculture and hydrocarbon output. That is coming on top of all those external headwinds.”

Mission Chief at IMF, Daniel Leigh, said that President Tinubu had moved quickly with important reforms, including ending the fuel subsidies and unifying the official exchange rates.

He said: “We welcome these initial bold reforms because we see them as paving the way towards stronger and inclusive growth.”

On Sub-Saharan Africa (SSA), the IMF chief: “On SSA there is a slight downward revision for the region as a whole we are expecting growth at about 3.3 per cent this year and that’s about 0.2 percentage points downward revision, there is a slight downward revision for next year to about four per cent.

“For SSA we have growth bothering out in 2023 and coming back up in 2024 inflation is peaking but it is still in double digits for more than 40 percent of the economies, we see African growth at 3.34 per cent and that is above average but it is below the potential that Africa has and it needs to catch up more quickly.

“The shock-ridden growth are diverse but there are several external ones coming from the higher food and fertilizer prices from the war in Ukraine the funding squeeze, harder to get capital and still very high spreads for several economies and exchange rate pressures.”

He said the global economy continued to recover from the pandemic, Russia’s invasion of Ukraine and the cost-of-living crisis, adding that in retrospect, the resilience had been remarkable.

“Despite war-disrupted energy and food markets and unprecedented monetary tightening to combat decades-high inflation, economic activity has slowed but not stalled. Even so, growth remains slow and uneven, with widening divergences.

The global economy is limping along, not sprinting,” the IMF chief said.

Gourinchas said the latest projections showed that the world economic growth will slow from 3.5 per cent in 2022 to three per cent this year and 2.9 per cent next year, a 0.1 percentage point downgrade for 2024 from July. This remains well below the historical average.

He said headline inflation continued to decelerate, from 9.2 percent in 2022 on a year-over-year basis, to 5.9 percent this year and 4.8 percent in 2024.

Gourinchas said: “Core inflation, which excludes food and energy prices, is also projected to decline, albeit more gradually, to 4.5 percent next year. Most countries aren’t likely to return inflation to the target until 2025.

“As a result, projections are increasingly consistent with a soft landing scenario, bringing inflation down without a major downturn in activity, especially in the United States, where our forecast increase in unemployment is now modest, from 3.6 percent to 3.9 percent by 2025.”

Gourinchas noted that fiscal buffers had eroded in many countries, with elevated debt levels, rising funding costs, slowing growth, and an increasing mismatch between the growing demands on the state and available fiscal resources.

This, he observed, had left many countries more vulnerable to crises and demands a renewed focus on managing fiscal risks.