Research and Analytics
Research and Analytics
Nigeria’s large infrastructure gap has made it difficult to improve the production and distribution of LPG locally. Therefore, the country resorted to importing LPG of about 65%, while 35% of consumers’ demand is locally supplied. Even though the LPG is precluded from Value Added Tax (VAT) according to section 38 of the Value Added Tax Act, the imported LPG is not free from the 7.5% VAT charges.
The global recovery continues but momentum has weakened, hobbled by the pandemic. Fueled by the highly transmissible Delta variant, the recorded global COVID-19 death toll has risen close to 5 million and health risks abound, holding back a full return to normalcy. Pandemic outbreaks in critical links of global supply chains have resulted in longer than expected supply disruptions, feeding inflation in many countries. Overall, risks to economic prospects have increased and policy trade-offs have become more complex.
The global economic recovery continues, but with a widening gap between advanced economies and many emerging market and developing economies. Our latest global growth forecast of 6 percent for 2021 is unchanged from the previous outlook, but the composition has changed.
Growth prospects for advanced economies this year have improved by 0.5 percentage point, but this is offset exactly by a downward revision for emerging market and developing economies driven by a significant downgrade for emerging Asia. For 2022, we project global growth of 4.9 percent, up from our previous forecast of 4.4 percent. But again, underlying this is a sizeable upgrade for advanced economies, and a more modest one for emerging market and developing economies.
Some central banks are currently debating whether to tighten monetary policy to fight inflationary pressures, after having eased decisively in response to the COVID-19 shock. In making such decisions, central bankers have to consider how much businesses and consumers will respond. The structure of the financial system and the future expectations of consumers and businesses are key drivers of how effective monetary policy actions will be. Yet there’s another, overlooked, driver: corporate market power.
The growth of infections in sub-Saharan Africa is now the fastest in the world, with an explosive trajectory that is outpacing the record set in the second wave. At this pace, this new wave will likely surpass previous peaks in a matter of days—and in some countries, infections are already more than double, or even triple, their January peaks. The latest (delta) variant—reportedly 60 percent more transmissible than earlier variants—has been detected in 14 countries.
Rising world food prices for producers are making headlines and causing concerns among the public. The most recent data show a moderation in consumer food price inflation globally, but as we explain below, that could change in the coming months. This would only add to the high prices that consumers in many countries already lived through last year.
Many countries have stepped up in the global fight against the pandemic, as have institutions such as the World Health Organization, the World Bank, Gavi (the Global Alliance for Vaccines and Immunization), the African Union, and others.
Yet, more than a year into the COVID-19 crisis, new cases worldwide are higher than ever. Urgent action is needed to arrest the rising human toll and economic strain.
The rise in long-term US interest rates has become a focus of global macro-financial concerns. The nominal yield on the benchmark 10-year Treasury has increased about 70 basis points since the beginning of the year. This reflects in part an improving US economic outlook amid strong fiscal support and the accelerating recovery from the COVID-19 crisis. So an increase would be expected. But other factors like investors’ concerns about the fiscal position and uncertainty about the economic and policy outlook may also be playing a role and help explain the rapid increase early in the year.
Many countries are experiencing a combination of high public debt and low interest rates. This was already the case in advanced economies even prior to the pandemic but has become even starker in its aftermath. A growing number of emerging market and developing economies are likewise enjoying a period of negative real rates—the interest rate minus inflation—on government debt. The IMF has called on countries to spend as much as they can to protect the vulnerable and limit long-lasting damage to economies, stressing the need for spending to be well targeted. This is especially critical in emerging market and developing economies, which face tighter constraints and associated fiscal risks, where greater prioritization of spending is of the essence.
It is one year into the COVID-19 pandemic and the global community still confronts extreme social and economic strain as the human toll rises and millions remain unemployed. Yet, even with high uncertainty about the path of the pandemic, a way out of this health and economic crisis is increasingly visible. Thanks to the ingenuity of the scientific community hundreds of millions of people are being vaccinated and this is expected to power recoveries in many countries later this year. Economies also continue to adapt to new ways of working despite reduced mobility, leading to a stronger than anticipated rebound across regions. Additional fiscal support in large economies, particularly the United States, has further improved the outlook.
In our latest World Economic Outlook, We are now projecting a stronger recovery for the global economy compared with our January forecast, with growth projected to be 6 percent in 2021 (0.5 percentage point upgrade) and 4.4 percent in 2022 (0.2 percentage point upgrade), after an estimated historic contraction of -3.3 percent in 2020.
