US-China Trade War Sparks IMF Global Growth Cut Warning

People watch as International Monetary Fund (IMF) managing director, Christine Lagarde speaks during opening remarks for the upcoming 2018 General IMF Meetings in Washington DC. Photo : ANDREW CABALLERO-REYNOLDS / AFP

The US-China trade war will hobble global growth, the International Monetary Fund warned on Tuesday, cutting its forecast for this year and next and predicting that “everyone is going to suffer” from a clash between the world’s two biggest economies.

At a meeting on the Indonesian island of Bali, the IMF painted a cautious picture for the near future, saying trade tensions and rising debt levels could dent China and the US — and leave developing economies especially vulnerable to sudden stresses.

“There is no denying that the susceptibility to large global shocks has risen,” the IMF’s top economist Maurice Obstfeld told reporters after the fund cut its outlook for global GDP growth by 0.2 percentage points to 3.7 percent for 2018 and 2019.

It is the first time the fund has cut its forecast in more than two years.

Tensions have soared in recent months with Donald Trump’s administration rolling out billions of dollars in tariffs against China in a bid to tackle its trade deficit and rein in what Washington views as unacceptable trade practices by the Asian giant.

China has responded in kind with its own barrage of levies, rattling nerves especially among other Asian economies and already vulnerable countries like Argentina, Turkey, and Brazil.

“Trade policy reflects politics and politics remains unsettled in several countries, posing further risks,” Obstfeld said.

The dominant US economy has been shielded so far from the ill effects of the trade war, thanks to stimulus through tax cuts and spending policies, but that will wear off by 2020, the IMF said.

When the world’s two biggest economies are “at odds”, Obstfeld said, that is going to create “a situation where everyone is going to suffer”.

Growth estimates for the euro area and Britain were also revised down with the report warning that growth “may have peaked in some major economies”.

 Rising protectionism

Finance ministers and central bankers from many of the IMF’s 189 member nations are meeting in Bali this week with talk of rising protectionism taking center stage.

The IMF report said “protectionist rhetoric” was being “increasingly turned into action”, warning such uncertainty “could lead firms to postpone or forgo capital spending and hence slow down growth in investment and demand.”

Global trade is projected to expand by 4.2 percent this year — 0.6 percent less than expected in July — dropping to four percent next year.

Obstfeld, who retires from the Fund later this year, said there were bright spots with some Latin American and African nations getting growth forecast upgrades.

The fund urged governments to focus on policies that can share the benefits of growth more widely, helping counter the growing mistrust of institutions, and to avoid “protectionist reactions to structural change.”

And it stressed “cooperative solutions” to help boost continued growth in trade “remain essential to preserve and extend the global expansion”.

‘Inflation surprise’

With US GDP growth expected to drop from 2.9 percent this year to 1.8 percent by 2020, the IMF also warned about the potential risk of an “inflation surprise”, fuelled by the same tax cuts and rising spending used to cushion the impact from the trade war.

That could result in higher-than-expected interest rates from the Federal Reserve and stock market uncertainty.

Fed rate hikes are already increasing pressure on emerging market economies by fuelling an outflow of capital as investors seek higher returns.

US stimulus also adds to the “already-unsustainable” debt and deficit that will undercut future growth, the report warned.

In export-heavy China, which is less able to mitigate the fallout from tariffs, the trade war is already having an impact, the IMF said.

Growth is projected to slow to 6.6 percent this year and 6.2 percent in 2019, a downgrade of 0.2 percentage points.

Further out, China’s economic growth is expected to slow gradually to 5.6 percent as the government shifts to “a more sustainable growth path” and addresses financial risks, the IMF said.

AFP

Ogun Govt. Seeks Partnership In Mechanised Cassava Production

Ogun government on mechanised cassava productionOgun State Government has expressed its readiness to collaborate with development partners in the area of mechanised cassava production and its value chains.

The government explains that the partnership is a way of diversifying the economic base of the state in southwest Nigeria.

The expression of interest was communicated by the Secretary to the State Government, Mr Taiwo Adeoluwa, who represented the State Governor, Ibikunle Amosun, at a workshop on mechanised cassava production.

The government informed the gathering that there was a provision in the 2017 Budget for the opening up of about 1,000 hectares of farmlands for cassava farming in the state.

The training which took place on Tuesday in Abeokuta, the Ogun State capital brought together agriculture experts and development partners from Asia, sub-Saharan Africa and the United States.

Some experts, Enorck Chikava and Adebayo Sangobiyi, raised concerns over the best practices in commercial and mechanised cassava production and agro-processing, stressing the need to ensure that such engagements sustain grow and develop the nation’s economy.

They also addressed some of the challenges facing the sector with a view to exploring some of the available options such as effective government intervention, more funds for research and development as well as improved seedlings among others.

Economy In Recession

Nigeria is the highest cassava producer in the world with at least 50 million metric tonnes per year.

However, the output per unit is very low as a result of the numerous challenges grappling with the agriculture sector, one of which is the recession in Africa’s most populated country.

While the government is making effort to address the economic challenges, a World Economic Outlook report released by the International Monetary Fund had predicted that the Nigerian economy would grow by 0.6% in 2017.

The report revealed that Nigeria’s real Gross Domestic Product was expected to increase marginally by 0.6% with Consumer Prices rising by 17.1%, effectively lifting the country out of an officially declared recession.

Attacks On Oil Facilities

The recession was triggered by the drop in the price of crude oil and the attacks on the nation’s oil facilities by some militant groups in the Niger Delta region.

The militants under the umbrella of the Niger Delta Avengers have claimed responsibility for most of the attacks which have drawn the attention of the Nigerian Government and some other foreign governments.

Disturbed by the spate of the militants’ activities, the Nigerian Army launched a special team code named “Operation Crocodile Smile”, amidst agreement between the government and the militants to hold talks after a ceasefire agreement from both sides.

Despite this agreement, several other attacks have been launched on oil installation by the Niger Delta Avengers and another splinter group.

Both military and militants have continued to point accusing fingers at each other, alleging a breach of agreements, as the military said it would not hesitate to repel militants’ attack in the region.

Customs Allege Plot To Massively Smuggle Rice Into Nigeria

Hameed Ali, Customs, RiceThe Nigeria Customs Service has raised alarm over a plot to illegally import 1.5 million metric tonnes of rice.

The Comptroller General of Customs, Colonel Hameed Ali (rtd), made the allegation during a media briefing on Wednesday in Abuja, Nigeria’s capital.

He revealed that at least 117,000 bags of illegally imported rice have been seized by the Customs since January 2016.

Reps summon finance and agric ministers
Impounded bags of rice

The Acting Director-General of the National Agency for Food, Drugs Administration and Control, Mrs Yetunde Oni, also corroborated the claims.

She said that the activities of smugglers were affecting Nigeria’s revenue generation, despite its economic recession.

Prior to the development, Customs authority in Ogun State Command decried the increase in the activities of smugglers.

Addressing reporters after vehicles loaded with bags of rice were seized at Idiroko border, the Ogun State Area Comptroller of Customs, Mr Multafu Waindu, paraded 18 vehicles loaded with bags of rice which were being smuggled into Nigeria from the Republic of Benin.

According to him, the vehicles and the grains were impounded around 3:00am at the porous Alari and Ifoyintedo bush paths, in Ipokia Local Government Area of the state where the smuggled bags of rice and the vehicles were abandoned by the smugglers.

Economy In Recession

Meanwhile, Nigerians have lamented the upsurge in the cost of rice from 12,000 Naira to over 20,000 Naira in some parts of the country, a fall out of the economic recession.

Economic analysts have said that more persons could go into smuggling of rice due to the increase in price, with most of them opting for Benin Republic where they could get rice for as low as 12,000 Naira.

While the government is making effort to address the economic challenges, a World Economic Outlook report released by the International Monetary Fund had predicted that the Nigerian economy would grow by 0.6% in 2017.

The report revealed that Nigeria’s real Gross Domestic Product was expected to increase marginally by 0.6% with Consumer Prices rising by 17.1%, effectively lifting the country out of an officially declared recession.

Attacks On Oil Facilities

The recession was a result of the drop in the price of crude oil and the attacks on the nation’s oil facilities by some militant groups in the Niger Delta region.gas-pipeline-vandalisation

Some militants under the umbrella of the Niger Delta Avengers have claimed responsibility for most of the attacks which have drawn the attention of the Nigerian Government and some other foreign governments.

Disturbed by the spate of the militants’ activities, the Nigerian Army launched a special team code named “Operation Crocodile Smile”, as the government agreed to dialogue with the militants after a ceasefire agreement from both sides.

In spite of the development, both military and militants have continued to point accusing fingers, alleging a breach of agreements as the military said it would not hesitate to repel militants’ attack in the region.

 

IMF Predicts Nigeria Will Be Out of Recession By 2017

IMF, Nigeria, Recession, 2017The International Monetary Fund has predicted that the Nigerian economy will grow by 0.6% in 2017, effectively lifting the country out of an officially declared recession.

In the IMF’s World Economic Outlook report released on Tuesday, Nigeria’s real Gross Domestic Product is expected to increase marginally by 0.6% with Consumer Prices rising by 17.1%.

Nigeria’s Current Account Balance is however forecast to slump further by 0.4% next year.

According to the Bretton Woods institution, the projected increase in global growth in 2017 to 3.4% hinges crucially on rising growth in emerging market and developing economies.

IMF, Nigeria, Recession, 2017Beyond 2017, IMF expects global growth to gradually increase by 3.8% in 2021.

This recovery in global activity, which is expected to be driven entirely by emerging market and developing economies, is premised on the normalization of growth rates in countries like Nigeria, Russia, South Africa, Latin America, and parts of the Middle East.

Sub-Saharan economies

In its spot assessment of sub-Saharan Africa, IMF sees increasing multi-speed growth.

IMF, Nigeria, Recession, 2017
IMF’s latest forecasts on fiscal balance and Gross Public Debt [Click here to view full image]
The institution however revised down growth projections for the last quarter of 2016 in the region to reflect the challenging macroeconomic conditions in economies like Nigeria.

In Nigeria for example, this revision was based on the contracted economic activity followed by disruptions to oil production, foreign currency shortages resulting from lower oil receipts, lower power generation, and weak investor confidence.

It says GDP projections in South Africa remains flat.

The report added that policy uncertainty in the country is making the adjustment to weaker terms of trade more difficult and that South Africa won’t see any modest recovery till next year as the commodity and drought shocks dissipate and power supply improves.

Angola is similarly adjusting to a sharp drop in oil export receipts. It is not expected to grow this year and will experience only feeble growth next year.

By contrast, several of the region’s non-resource exporters, including Côte d’Ivoire, Ethiopia, Kenya, and Senegal, are expected to continue to expand very robustly at more than 5% in 2016, benefiting from low oil prices and enjoying healthy private consumption and investment growth rates.

Off the mark?

For Nigeria, there have been several predictions about when the country’s economy will turn the corner.

Global credit rating agency, Moody’s, also predicts that Nigeria will be out of recession in 2017.

A Senior Vice President at Moody’s, Aurelien Mali said they expect Nigeria to contain pressures on its public finances in the short term.

IMF, Nigeria, Recession, 2017The Governor of the Central Bank of Nigeria, Godwin Emefiele a few weeks ago however projected that the nation’s economy will exit the recession by the end of this year.

He says this follows the various measures put in place by the Federal Government and monetary authorities becomes manifest.

One of such measures he listed includes the establishment of a bridge fund to stimulate the economy.

In his words, “The worst is over…”