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FY’23 Macroeconomic Outlook - Riding the seesaw

From a full-fledged pandemic to a war amongst key commodity producers, the world has endured so much in just three years. While the war in Europe trudges on, a trade deal to protect food exports doused additional supply chain pressures, contributing to lower inflation in the United States of America. Surging inflation in both advanced and emerging economies has pushed central banks to respond adequately. At this pace, central banks could be hiking their way into recession come 2023. With OPEC+ rolling out supply curbs in response to hawkish moves by the US Fed, the state of the Russia-Ukraine war remains a dealbreaker. A truce could ease supply chain pressures and reduce commodity prices. However, escalation could send the world into a frenzy of high inflation, painful recessions, and financial market volatility.

 

Africa could remain on the precipice as high fuel prices and restricted access to the international debt market exposes fragile economies. While net-oil exporters benefit from the surge in commodity prices, net-oil importers could continually reel under the inflationary passthrough, tight financing conditions, and balance of payment deficits.

 

In Nigeria, the race to choose the next president heats up, especially as the incumbent completes his constitutional term limit. Notwithstanding, the timeline for implementing a critical fiscal reform has been extended to the handover month of the outgoing administration. Should subsidies be removed as planned, inflation could remain elevated, calling for more tightening by the apex bank. Overall, this singular decision could improve external receipts and enable the apex bank to intervene in the foreign exchange market