EIU forecasts 6.5% GDP in 2013, to average above 7% by 2014

BY PROVIDENCE OBUH

There is a strong indication that the country’s Real GDP growth  is to drop to 6.5 percent from a seven percent maintained over the years.

This is due to the damage caused by the severe flooding in late 2012 and constraints in infrastructure and the business environment, the world’s foremost provider of country, industry and management analysis, the Economic Intelligence Unit (EIU) said.

Meanwhile the intelligence group said that economic expansion will be buoyed by the robust performance of the non-oil sector, although 2013 will be a difficult year, given unfavourable global prospects, however, Real GDP growth is then expected to average above seven per cent between 2014 and 2017.

“Real GDP growth of 6.5% is forecast for 2013, below the annual average of 7% over the past decade given global uncertainty, the damage caused by the severe flooding in late 2012 and constraints in infrastructure and the business environment. The forecast period will gradually see a more favourable global and domestic picture emerge, which will allow real GDP growth to average a little over 7% a year in 2014-17.

However, this is still below the double-digit levels required if the country is to see any real large-scale improvement in the population’s living standards. This is primarily the result of the dire state of Nigeria’s infrastructure, notably the electricity supply.”

On the other hand, the EIU is of the view that the Central Bank of Nigeria (CBN) will find monetary policymaking challenging during the forecast period of 2013, even as balancing the desire to manage inflation and maintain a stable exchange rate against the government’s aim of reducing the cost of borrowing by the private sector to encourage investment in productive activities will prove difficult.

“In the second half of 2013 and into 2014 there is likely to be some room for the CBN to ease monetary policy as inflation subsides. Disappointing economic growth levels in these years will also serve to increase pressure for policy easing, however, with inflation expected to increase in the second half of the forecast period, any monetary easing is likely to be relatively short-lived.”

Accordingly, a threat to effective monetary policymaking is the poor relations between the CBN governor, Lamido Sanusi, and the legislature, EIU said.