‘What experts mean by stable economy’ — Yemi Kale explains Okonjo-Iweala’s comment

Yemi Kale, group chief economist and managing director, research and international cooperation, African Export-Import Bank (Afreximbank), says describing a nation’s economy as stable does not always mean that citizens are free from hardship.

On August 14, Ngozi Okonjo-Iweala, director-general of the World Trade Organisation (WTO), said President Bola Tinubu must be given credit for stabilising the economy.

While offering his view on the debate caused by Okonjo-Iweala’s statement, Kale, who is a former statistician-general of the National Bureau of Statistics (NBS), in a post on Saturday, explained that stability refers to a stage where the economy no longer undergoes significant fluctuations.

“When economists says “an economy is now stable”, they usually mean that the economy has reached a point where it is no longer experiencing major fluctuations/ disruptions,” he said.

“In practical terms, it suggests Macroeconomic Indicators are Steady; Predictability and Confidence where Businesses, investors, & consumers feel more confident making long-term  plans & there are no Immediate Crisis.”

Kale said stability signifies a point where the economy has reached a balanced state, allowing economic activities to proceed without major turbulence.

“When economists say the economy is “stable,” they usually mean that overall indicators (like inflation, exchange rates, and GDP growth) are no longer swinging unpredictably,” he said.

“For eg Inflation falling from 25% to 12% & staying steady might be seen as stability. However, prices may still be very high compared to past years, meaning people continue to struggle.

“Citizens experience the economy differently through cost of food, housing, transport, healthcare, and wages.”

Even in a “stable” economy, Kale said, if incomes are low and basic goods remain expensive, “families still face hardship”.

“Stability might only mean conditions are not getting worse quickly, not that they’ve improved enough to ease daily struggles,” he said.

“So both stability which is good can coexist with hardship which is bad for several reasons: 1. Stabilization Phase: After a crisis (e.g.currency crash or hyperinflation), stability may mean the bleeding has stopped.

“But citizens may still be hurting from the high cost of living established during the crisis.”

‘ECONOMIC EFFECT BENEFITS INVESTORS AND BUSINESSES’

Commenting on the lag effect of reforms, Kale said economic stability often benefits “investors and businesses first, saying they “might start posting great results”.

“It can take months or even years before stability eases hardship & translates into job creation,higher wages, or cheaper goods for citizens. Assuming the stability holds long enough(very important),” he said.

The economist noted that, until then, the hardship remains real, immediate, and personal, warning that stability could still reverse, in which case the relief would not materialise.

“So in summary, Economic stability is like stopping a boat from rocking wildly but hardships persist if the boat is still far from shore,” Kale said.

“For citizens, stability may only mean less new hardship is being added,not that life has become easier yet.

“But the first step to reversing hardship is stability & stopping the bleed. It’s a necessary not sufficient condition.”

Kale emphasised that his perspective is strictly technical and not political.