As reactions continue to trail the release of Q3’20 Gross Domestic Product (GDP) data by the National Bureau of Statistics (NBS) at the weekend, analysts at United Capital Research are predicting an improved performance for the economy in the fourth quarter. Although the NBS figures, in line with expectations, showed that the Nigerian economy slipped into its second recession in four years as the GDP contracted for the second consecutive quarter, the negative growth of 3.62 per cent recorded in the third quarter of 2020, was an improvement on the 6.10 per cent contraction of he previous quarter.
Citing the recent improvement in the manufacturing and non-manufacturing Purchasing Managers’ Index (PMI), the analysts, in a note obtained by New Telegraph yesterday, said they expected Q4 GDP data to be better. The analysts stated: “For the rest of the year, we maintain that the sharp contraction recorded in Q2-2020 is as worst as it can get for the year considering the marked improvement observed in the Q3-2020 numbers.
If the Purchasing Managers Index is anything to go by, recent improvement observed in manufacturing and non-manufacturing PMI, which indicated a rebound to the 50point threshold foretells a more optimistic future. “For context, we expect the growth observed in the ICT, Financial services, Agric and Utilities to not only be sustained by further supported by improvement in the oil & gas sector considering the announcement of a vaccine for Covid-19.
Although we imagine that compliance to OPEC+ production cut agreement (capped at 1.50mbpd from August-2020 to Dec-2020) and compensation for prior months overproduction with deeper cut may limit production to below pre-COVID-19 levels of above 2.0mbpd, we think improvement in oil prices will further soften contraction in the oil & gas sector.
Again, the full re-opening of economic activities, as well as the end of the year festivities, is expected to buoy consumer demand, thus, enhance output level in the trade and manufacturing sectors.”