World Bank sees two per cent output growth in 2023

•Banking sector stress, interest rate, others top Spring Meetings deliberation
•Nigerian monetary, fiscal authorities to reveal progress on key reforms

On account of China’s relaxation of COVID-19 restrictions and the better-than-expected performance of the advanced economies last quarter, the World Bank has reviewed its January’s 1.7 per cent growth to two per cent.

World Bank Group President, David Malpass, handed down the forecast yesterday, in a media interaction ahead of the Spring Meetings of the World Bank and International Monetary Fund (IMF).

The projection came as a peep into the April World Bank World Economic Outlook due for release this afternoon.

Malpass explained that the upward projection modifications are based on China ending its lockdown policy as well as advanced economies doing “somewhat better than expected” in the first month of this year.

The World Bank chief said the gross domestic product (GDP) of the United States is expected to grow at 1.2 per cent this year, compared to 2.1 per cent recorded last year.

One of the downsides to growth is the latest banking stress, which he said, “dampens activity” and raises concerns about growth prospects.

The crisis in the banking sector is a major talking point to the Spring Meetings with stakeholders expected to examine the implication of the potential threat of failed banks on the global financial system.

The back-to-back collapses of the United States banks and the rising tension in Switzerland have raised questions about the stability of the financial system and its weather the storm in the face of protracted economic challenges.

Some experts have called on the central banks to slow down or halt interest rate hikes and prioritise financial system stability. But the Federal Reserve System, which has expanded the liquidity line to save the banking sector, went on with a rate hike at its March meeting.

Globally, the aggressive rate increase is already walking its way through data with the United States labour market, for instance, showing signs of weakness in March.

Back home, Nigeria’s monetary policy rate (MPR) has hit a multi-decade high of 18 per cent while the maximum lending rate has surpassed 28 per cent.

Experts said the interest rate would need to be reviewed downward to give the private sector headroom. With credit to the real sector stalling or growing at a snail-speed in the past decade, manufacturing and agriculture are the albatross of the country’s output growth.

In January, the bank lowered Nigeria’s growth forecast to 2.9 per cent, following the country’s rising risks and poor performance of key sectors such as petroleum.

But its sister organisation (IMF) upgraded the country’s output growth projection to 3.2 per cent, from three per cent earlier estimation.

With the country’s macroeconomic policies on the cusp of a major shift following next month’s leadership change, local economists say a major shift is in the offing and that the anaemic growth of the past eight years could change remarkably.

The inefficiency of the power sector, rigid foreign exchange market and unfriendly tax system, to which the Bretton Woods institutions have demanded broad and audacious reforms, are among the gridlocks to the country’s chance to accelerate growth.

This week, key leaders of the monetary and fiscal authorities will be joining the Spring Meetings to shed light on the progress the country has made in the reforms processes.