CAPE Economic and Consulting, one of the leading economic research and consulting/advisory services providers, has projected that despite the slight decline in Nigeria’s real Gross Domestic Product (GDP) in the first quarter (Q1) this year, the outlook for improved performance of the economy in the second quarter (Q2) remains bright.
Making the forecast in its just published ‘Economic Newsletter, Volume 2, Issue 6, July 2023’, the research firm recalled that before the nation’s GDP growth slipped to 2.31% year-on-year (Y-o-Y) in Q1 this year from the 3.52 per cent and 3.11 per cent recorded in the preceding quarter and corresponding period of 2022, the economy had recorded positive trends for 10 consecutive quarters.
The firm’s analysts further noted that the 2023 Q1 GDP growth was 1.21 and 0.8 percentage points lower than the outturn recorded in 2022 Q4 and the corresponding 2022 Q1, respectively, adding that the NBS attributed the decline mainly to the constraining effects of cash crunch in the first quarter triggered by naira redesigned and aggressive implementation of the cashless policy.
According to the experts, as a result of the removal of fuel subsidy and the exchange rate unification by the new administration, energy prices and cost of production are expected to rise sharply, thereby slowing output expansion as reflected by the purchasing managers’ index (PMI) for June 2023.
They also observed that the Stanbic IBTC’s purchasing PMI for June indicated a dip to 53.2 from 54.0 recorded in April 2023.
Despite the slowdown in the GDP growth in Q1 2023, the economists projected that “nevertheless, output growth is expected to remain within the positive region in 2023Q2 as businesses and households adapt to the new economic realities.”
On development in the global economy, the analysts noted that global output growth continued to show resilience, away from the gloomy outlook at the start of the year amidst high level of uncertainties, policy rate hikes and stubborn core inflation in the first half of 2023.
However, they cautioned that further interest rate hikes could aggravate the risk of financial sector instability and propel the global economy into recession.
