Whilst the world continues to recover from the COVID-19 pandemic, new shocks, such as the Russia-Ukraine conflict, and heightened inflationary trend, have emerged, thereby wreaking havoc on the global economy. These shocks drifted many economies, including advanced and emerging countries, far from full recovery from the impacts of the COVID-19 pandemic. A combination of a surge in commodity prices, heightened global inflationary pressure and supply chain disruptions dampened the global economic performance and outlook.
On the domestic front, the Nigerian economy witnessed a recovery from the COVID-19 pandemic with a real Gross Domestic Products (GDP) growth of 3.33 percent in H1-2022 (3.11 percent in Q1-2022 and 3.54 percent in Q2-2022). The performance of the economy in the period under review signified that Nigeria has fully recovered from the impact of the pandemic. However, there are mixed performances in policy and external environments with a hostile business operating space for private sector in the period.
The GDP growth projection for the year 2022 was also revised downward to 2.5 percent in business as usual, while the best case is 3.5 percent, and the worst case is estimated at 1.0 percent. In addition to reviewing other key macroeconomic variables, the report ends with specific and short-term policy recommendations to ensure the Nigerian economy closes the year on a robust level.
Overview of The Global Economy
Whilst the world continues to recover from the COVID-19 pandemic, new shocks, such as the Russia-Ukraine conflict, heightened inflationary trend, have emerged, thereby wreaking havoc on the global economy. Prior to the outbreak of conflict, the global economy was predicted to fully recover from the pandemic in 2022. Many forecasts for 2022 predicted a robust macroeconomic environment with favourable economic and financial conditions in both emerging and advanced economies.
On account of the direct and indirect effects of new economic shocks, the global economic situation remains dire. A classic example is the economic effects of the Russia-Ukraine conflict attributable to Russia’s deep integration into the global economy through commodity markets – gas, oil, and metals – trade, and financial linkages.
The global GDP growth has been revised downward in three consecutive World Economic Outlook (WEO) publications of the International Monetary Fund (IMF) for 2022, from 4.9 percent in October 2021 to 4.4 percent in January 2022, 3.6 percent in April 2022, and 3.2 percent in July 2022.
The growth forecast for Advanced Economies and Emerging Markets for 2022 has also been reduced. Sub-Saharan Africa is expected to benefit significantly from the spillover effects of the conflicts on international commodity markets as commodity prices rise significantly.
Emerging Shocks Height the Fear of Global Recession
In the first eight months of 2022, commodity prices rose due to Russia-Ukraine conflict, which disrupted global commodity flows, particularly energy, fertilisers and selected agricultural products.
Russia, for example, is the world’s leading exporter of natural gas, nickel, and wheat, while Ukraine is the world’s leading exporter of wheat and soyabean. Following the outbreak of the conflict (Russia-Ukraine war), these commodities recorded a sharp increases in prices. Crude oil prices have reached their highest level in ten years. Brent crude oil prices averaged US$102 per barrel in the period under review, the highest level since 2013. Food prices also increased globally. Trade disruptions and high input costs fueled a rally that triggered prices to all-time highs for some food commodities, particularly wheat, fertiliser, and other agricultural commodities.
The World Bank’s food price index also gained 7.2 percent in the period under review. . The metals price index also increased significantly. Since these metals are critical inputs into renewable energy technologies, price increases or supply disruptions of metals could make the energy transition more costly.