IMF warns of longer inflation struggle for Nigeria, other African, countries, Middle East , lowered global growth to 3.2%

International Monetary Fund chief economist Pierre-Olivier Gourinc has said that “progress in quelling inflation is more pronounced for advanced economies such as the U.S., while it will take longer for countries in the Middle East and Sub-Saharan Africa, which are still struggling with double-digit price increases, Pierre-Olivier Gourinc has also told a news conference that risks of a U.S. recession are now diminished, as the U.S.’ strong economic performance is being powered by improvements in productivity and labour supply due to an influx of immigrants”. Meanwhile it lowered its global growth forecast for next year and warned of accelerating risks from wars to trade protectionism, even as it credited central banks for taming inflation without sending nations into recession. Global output will expand 3.2%, 0.1 percentage point slower than a July estimate, the IMF said in an update of its World Economic Outlook released on Tuesday. It left the projection for this year unchanged at 3.2%. Inflation will slow to 4.3% next year from 5.8% in 2024.

According to IMF “Emerging Markets with Weaker Fiscal Buffers Could Face More Constrained Funding Conditions Although many emerging markets have experienced lower financing costs in recent years, investors continue to be attuned to these markets’ fiscal sustainability. After progress following the pandemic, the momentum on fiscal consolidation has waned, and market analysts’ consensus expectations regarding the budget balance for the aggregate government in 15 major emerging markets over the next three years have become more pessimistic and are firmly in deficit territory, with 11 of these countries set to underperform 13 analysts’ forecasts for fiscal year 2024.

“Some sovereigns could be ensnared in a “debt begets more debt” quandary, especially considering that still- high global interest rates, larger financial spillovers from advanced economies, and weaker prospects in regard to longer-term economic growth are making it more difficult to service existing debt. To avoid such an outcome, these sovereigns need to improve their primary balances. And yet many emerging markets are operating well below their long-term fiscal buffers, Compared to analysts’ consensus estimates made in the third quarter of 2022. The concept of fiscal buffers is motivated by the primary balance space, as described in the April 2024 Fiscal Monitor.

“The debt-stabilising primary balance for the contemporaneous year can The interest rate is also weighted by outstanding local- and foreign-currency-denominated debt and takes into account the cost arising from annualised depreciation of the external debt based on historical long-term data (January 2000 to July 2024). Long-term nominal growth (g) is derived from World Economic Outlook estimates, and gross debt (d ) is based on the prevailing gross government debt level as of the end of 2023. The 2024 fiscal buffer is estimated by subtracting the long-term debt-stabilising primary balance from the expected 2024 primary balance”.

International Monetary Fund chief economist Pierre-Olivier Gourinc has said that “progress in quelling inflation is more pronounced for advanced economies such as the U.S., while it will take longer for countries in the Middle East and Sub-Saharan Africa, which are still struggling with double-digit price increases, Pierre-Olivier Gourinc has also told a news conference that risks of a U.S. recession are now diminished, as the U.S.’ strong economic performance is being powered by improvements in productivity and labour supply due to an influx of immigrants”. Meanwhile it lowered its global growth forecast for next year and warned of accelerating risks from wars to trade protectionism, even as it credited central banks for taming inflation without sending nations into recession. Global output will expand 3.2%, 0.1 percentage point slower than a July estimate, the IMF said in an update of its World Economic Outlook released on Tuesday. It left the projection for this year unchanged at 3.2%. Inflation will slow to 4.3% next year from 5.8% in 2024.

According to IMF “Emerging Markets with Weaker Fiscal Buffers Could Face More Constrained Funding Conditions Although many emerging markets have experienced lower financing costs in recent years, investors continue to be attuned to these markets’ fiscal sustainability. After progress following the pandemic, the momentum on fiscal consolidation has waned, and market analysts’ consensus expectations regarding the budget balance for the aggregate government in 15 major emerging markets over the next three years have become more pessimistic and are firmly in deficit territory, with 11 of these countries set to underperform 13 analysts’ forecasts for fiscal year 2024.

“Some sovereigns could be ensnared in a “debt begets more debt” quandary, especially considering that still- high global interest rates, larger financial spillovers from advanced economies, and weaker prospects in regard to longer-term economic growth are making it more difficult to service existing debt. To avoid such an outcome, these sovereigns need to improve their primary balances. And yet many emerging markets are operating well below their long-term fiscal buffers, Compared to analysts’ consensus estimates made in the third quarter of 2022. The concept of fiscal buffers is motivated by the primary balance space, as described in the April 2024 Fiscal Monitor.

“The debt-stabilising primary balance for the contemporaneous year can The interest rate is also weighted by outstanding local- and foreign-currency-denominated debt and takes into account the cost arising from annualised depreciation of the external debt based on historical long-term data (January 2000 to July 2024). Long-term nominal growth (g) is derived from World Economic Outlook estimates, and gross debt (d ) is based on the prevailing gross government debt level as of the end of 2023. The 2024 fiscal buffer is estimated by subtracting the long-term debt-stabilising primary balance from the expected 2024 primary balance”.