The economy could recover from last year’s COVID-19 losses in the next 12 months if vaccination spread across the globe this year as expected, projections by the World Bank have suggested.
The Bank projected, in its January 2021 Global Economic Prospects released yesterday, that Nigeria’s economy will grow by 1.1 per cent this year just as the global growth is expected to expand by 4 per cent.
The growth forecast is just 30 basis points lower than -4.3 per cent gross domestic product (GDP) lost to COVID-19 last year.
The bank, however, said the recovery could be subdued unless policymakers move decisively to tame the pandemic and implement investment-enhancing reforms.
According to the Bretton Woods institution, the modest growth recorded after last year’s contraction is a challenge by widespread poverty, which may suppress economic activities and incomes for an extended period.
“Top near-term policy priorities are controlling the spread of COVID-19 and ensuring rapid and widespread vaccine deployment. To support economic recovery, authorities also need to facilitate a re-investment cycle aimed at sustainable growth that is less dependent on government debt,” it noted.
“While the global economy appears to have entered a subdued recovery, policymakers face formidable challenges – in public health, debt management, budget policies, central banking and structural reforms – as they try to ensure that this still a fragile global recovery gains traction and sets a foundation for robust growth,” the Bank’s Group President, David Malpass, noted.
Malpass also said there is a need for a major push to “improve business environments, increase labour and product market flexibility as well as strengthen transparency and governance”.
Acting Vice President for Equitable Growth and Financial Institutions, Ayhan Kose, said the pandemic has exacerbated debt risks in emerging markets and developing economies and that weak growth prospects would likely increase debt burden while eroding borrowers’ ability to service the debt.
“The global community needs to act rapidly and forcefully to make sure the recent debt accumulation does not end with a string of debt crises. The developing world cannot afford another lost decade,” Kose cautioned.
The Bank called on policymakers to continue to sustain the modest recovery recorded and gradually shift “from income support to growth-enhancing policies”.
It observed that policies that improve health, education services, digital infrastructure, climate resilience and business/governance practices would mitigate the economic damage caused by the pandemic, reduce poverty and advance shared prosperity for emerging markets in the long-run.
It added: “Central banks in some emerging market and developing economies have employed asset purchase programmes in response to pandemic-induced financial market pressures, in many cases for the first time. When targeted to market failures, these programmes appear to have helped stabilize financial markets during the initial stages of the crisis.”
“However, in economies where asset purchases continue to expand and are perceived to finance fiscal deficits, these programmes may erode central bank operational independence, risk currency weakness that de-anchors inflation expectations and increase worries about debt sustainability.”
