IMF warns of lower oil prices in 2019, calls for economic diversification
Oil producing nations have been alerted over a possible decline in crude oil prices, as the International Monetary Fund, IMF, projects that the average price of the product could drop from $62.31 a barrel in 2018 to $58.24 a barrel in 2019.
The IMF in its World Economic Outlook Report launched in Washington DC, advised oil-dependent economies, including Nigeria, to intensify economic diversification as it foresees further crash of crude oil prices in the near future.
Speaking to journalists across African countries through video conference, the fund said, “Some low-income countries like Mozambique and Nigeria have experienced financial stress or deteriorating loan quality in recent years as growth has moderated and corporate balance sheets have weakened.
“Further deterioration in loan quality would impair credit intermediation and ability of the banking sector to support growth, which would raise the risk of cost recapitalization and severely burden the already strained public finances,’’ the IMF said.
The outlook is mixed across emerging markets and developing economies. Prospects remain favourable in emerging Asia and Europe, but are challenging in Latin America, the Middle East and sub-Saharan Africa, where despite some recovery, the medium term outlook for commodity exporters remains generally subdued, with a need for further economic diversification and adjustment to lower commodity prices.
“More than one-quarter of emerging markets and developing economies are projected to grow by less than advanced economies in per capita terms,” it said.
While presenting the outlook, Maurice Obstefeld, the Economic Counsellor and Director of Research Department of IMF, said while some of the emerging economies can expect longer term growth rates comparable to pre-crises rates, many commodity exporters will not be so lucky, despite some improvements in the outlook for commodity prices.
He said, “At the IMF, we have been saying for a while that the current cyclical upswing offers policy makers an ideal opportunity to make long-term growth stronger, more resilient, and more inclusive. The present good time will not last for long, but sound policies can extend upswing while reducing the risk of a disruptive unwinding.”
Obstfeld said the forecast was borne out of the continued strong performance in the Euro area, Japan, China and the United States.
“Despite the good near-term news, longer-term prospects are more sobering. Advanced economies are far facing aging population, falling rates of labour force and low productivity growth.
“Emerging and developing economies present a diverse picture. Many of these countries need to diversify their economies to boost future growth and resilience,” he said.
The IMF encouraged each national Government to advance growth by resolving issues of climate change, infectious diseases, cyber-security, corporate taxation and corruption, among others.
The global lender also increased its economic growth forecast for Nigeria from 1.9 to 2.1 percent by the end of 2018, maintaining that Nigeria will also grow by 1.9 percent in 2019.