The World Bank in its recent flagship report (Global Economic Prospect) has said that the Nigerian economy is going to shrink by 3.2% in 2020. This is against the backdrop of a global economy which has suffered a devastating blow from the impact of the Covid-19 pandemic. World Bank’s baseline forecast envisions the deepest global recession since World War II and said to shrink by 5.2% in 2020.
The COVID-19 pandemic has, with alarming speed, delivered a global economic shock of enormous magnitude. This has led to steep recessions in many countries. According to the World Bank “The baseline forecast envisions a 5.2 percent contraction in global GDP in 2020, the deepest global recession in eight decades, despite unprecedented policy support. Per capita incomes, the vast majority of Emerging Markets and Developing Economies (EMDEs) are expected to shrink this year. The global recession would be deeper if bringing the pandemic under control took longer than expected, or if financial stress triggered cascading defaults.”
Putting this in perspective, it means Nigeria’s gross domestic product, the widest metric for measuring economic growth will contract by 3.2% in 2020. This is according to the World Bank report. This is despite the unprecedented fiscal and monetary policy support the government has been rolling out. The federal government has been working to spend N2.3 trillion to fund its economic sustainability plan. The Nigerian economy might see a rebound in Q4:2020 or early next year if this is implemented.
Billions of naira have been deployed to help companies stay in business. So, this will help keep cash in consumers’ wallets and let financial markets function properly.
The report includes an exhaustive analysis of the outlook for emerging markets and developing economies. These economies are now fighting on two fronts; containing the domestic outbreak and its consequences and coping with the economic spillovers from the deep recessions in advanced economies.
However, the World Bank emphasized an urgent need for health and economic policy action. It will require global cooperation to achieve this. Also, the bank sees the need to protect vulnerable populations and improve countries’ capacity to prevent and cope with similar events in the future.
Emerging Markets And Developing Economies (EMDEs)
Since Emerging Markets and Developing Economies (EMDEs) are particularly vulnerable, it’s critical to strengthen their public health care systems. This will help address the challenges posed by informality and limited safety nets. Also, reforms that enable strong and sustainable growth will be taken, once the health crisis abates.
Nigeria, which is Africa’s largest economy is heavily reliant on the resources from the downstream sector. About 80% of exports, and half of government revenues comes from oil. This sector is projected to shrink by 10.6%, while non-oil output will fall by 2.1%.
According to the report, the World Bank’s forecast suggests that Nigeria’s recovery is said to be less severe. The gradual increase in oil prices is expected to boost investors’ confidence. This is based on the Organization of Petroleum Exporting Countries (OPEC+) plus meeting. The meeting was to further review the production cut till July and attend to other fiscal adjustments. This will increase oil revenues and keep the economy afloat for some time.
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What This Means For Entrepreneurs
Human capital development will be affected especially in Nigeria because of interruptions in schooling.
Entrepreneurs should, therefore, pay attention to these staggering figures, especially in these challenging times, to balance business projections and analysis.