World Bank, IMF advocate freer trade as stagflation fear spreads


The World Bank and the International Monetary Fund (IMF) says there are prospects in the removal of trade barriers and incentives for higher production as the risk of stagflation spreads across the global community.

This comes as the World Bank raises Nigeria’s 2022 economic growth prospect to 3.4% which is 0.9 percentage points higher than 2.5% contained in its January Global Economic Prospect.

The growth is expected to slow down to 3.2% next year through 2024, which is also higher than its earlier position by 40 basis points.

Global growth is expected to slump from 5.7 per cent in 2021 to 2.9 per cent in 2022 – significantly lower than 4.1 per cent that was anticipated in January.

It is expected to hover around that pace from 2023 to 2024 as the war in Ukraine disrupts activity and pent-up demand fades while fiscal and monetary policy accommodation is being withdrawn.

“Elevated oil prices are supporting activity in Angola and Nigeria — the two biggest oil-producing economies in the region (SSA). Growth in Nigeria strengthened in the first half of the year, driven by increased oil revenues and a strong recovery in non-oil sectors, the country’s main port following severe floods has exacerbated supply chain disruptions related to Russia’s invasion of Ukraine and mobility restrictions in China in response to pandemic outbreaks. Although the fiscal position has improved somewhat, high public debt constraints public spending, particularly investment,” says the World Bank.

The World Bank says countries must brace up for the threat of stagflation but notes that an increase in production and reduction of trade restrictions could help to moderate the prices of essentials and save the situation. It called on countries to reduce trade barriers as deliberate actions to prevent supply chain disruptions.

“The war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hampering growth. For many countries, a recession will be hard to avoid,” the World Bank Group President, David Malpass, said.

“Markets look forward, so it is urgent to encourage production and avoid trade restrictions. Changes in fiscal, monetary, climate and debt policy are needed to counter capital misallocation and inequality,” he added.

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