The International Monetary Fund has expressed concern over the rise in trade uncertainty in Nigeria and many other economies amid the escalating trade tensions between the United States and China. The IMF said on Monday that rising trade uncertainty was cited as a driving factor for “sluggish global growth” in the current issue of its World Economic Outlook, which described the state of the world economy.
While unveiling a new index that tracks trade uncertainty across 143 countries, the Washington-based fund described the World Trade Uncertainty index as “the first effort to create a trade uncertainty index for a large set of advanced and developing economies.” The index shows increased uncertainty starting around the third quarter of 2018, coinciding with tariff increases by the US and China. It then declined in the Q4 2018 as both countries announced a deal to halt the escalation of tariffs in December.
It, however, significantly spiked again in Q1 2019 following a substantial expansion of tariffs. “Globally, the trade policy uncertainty index is rising sharply, having been stable at low levels for about 20 years,” the IMF said. Based on the fund’s estimates, the increase in trade uncertainty observed in the Q1 2019 could be enough to reduce global growth by up to 0.75 percentage point in 2019.
The level of trade uncertainty in Nigeria increased from zero per cent in the third and fourth quarters of 2018 to 11.25 per cent in the first quarter of this year. It stood at 6.24 per cent in the second quarter, compared to the global level of three per cent. The level of trade uncertainty in Angola, Africa’s second largest oil producer after Nigeria, was put at 7.97 per cent in Q2 2019, down from 11.85 per cent in Q1. In Ghana and South Africa, the levels of trade of uncertainty stood at zero per cent and 5.81 per cent in Q2 respectively.
The IMF said high levels of trade uncertainty had been recorded in key US trading partners such as Canada, Mexico, Japan, and large European economies, and in many other countries geographically close to the US and China. The level of trade uncertainty in the US rose to 25.67 per cent in Q2 2019 from 20.59 per cent in Q1, while that of China increased to 28.53 per cent in Q2 from 10.23 per cent in Q1.
The levels of trade uncertainty in the United Kingdom, Saudi Arabia, Russia and India stood at 3.78 per cent, 7.89 per cent, 8.21 per cent and 6.23 per cent respectively. “The recent rise in the uncertainty index has been felt the most in the Western Hemisphere, followed by Asia-Pacific and Europe. In contrast, trade uncertainty remains moderately low in the Middle East, Central Asia, and Africa. Advanced economies show the highest trade uncertainty, followed by emerging markets. While rising, trade uncertainty remains, on average, at low levels in low-income economies,” the IMF said.