External and fiscal vulnerabilities dampen growth outlook for 2022 – CB

The economy is expected to experience modest growth in the near term as the economy is to be reset with a debt restructuring program and long-overdue structural reforms, alongside an IMF-backed economic adjustment program, which is expected to enable the economy to gain long-term momentum. term, according to the Central Bank’s 2021 annual report. The accumulation of macroeconomic instability in the economy, resulting from heightened vulnerabilities on the external and fiscal fronts, increased social unrest and political instability, and rising commodity prices globally globally and domestically, is expected to significantly weigh on growth prospects for 2022 and have lingering effects in the immediate future leading to slower growth, the report said.

He noted that economic activity is expected to slow down amid the government’s announcement of a suspension of external debt service for an interim period and the initiation of a debt restructuring program. However, it notes that the implementation of prudential macroeconomic policies aimed at stabilizing the economy, combined with an IMF commitment, better coordination of monetary and fiscal policies and the envisaged reforms of public enterprises should restore the pace of growth. medium term.

The aggressive tightening of monetary policy should contain excessive inflationary pressures in the economy, thus anchoring inflationary expectations, which is vital for creating an environment conducive to investment.

However, in the short term, a significant rise in interest rates would discourage lending and hamper economic growth, but would go some way to addressing interest rate anomalies and exchange rate pressures, thereby attracting medium- and long-term productive investments.

The report notes, however, that the tightening of monetary policy would help stabilize the external value of the national currency, facilitating the inflow of foreign currency.

Export earnings are expected to moderate in 2022 before strengthening in the period ahead with the expected recovery in global demand, favorable exchange rates and policies aimed at improving the tradable goods sector, while the Import demand is expected to decline due to tight monetary policy, difficulty in financing imports and rising global commodity prices.

Global economic growth is estimated at 6.1% in 2021 against a contraction of 3.1% in 2020 according to the International Monetary Fund’s World Economic Outlook released last month.

Shirlene J. Manley