Mozambique and Cape Verde relatively protected from impact of financial crisis, AfDB says

11 May 2009

Dakar, Senegal, 11 May – Mozambique and Cape Verde are two African countries that are relatively protected from the world financial crisis, despite some unfavourable indicators, according to a document from the African Development Bank (AfDB) issued Sunday in Dakar.

In both countries economic growth will slow this year (from 6.1 percent in 2008 to 3.6 percent in Cape Verde and from 6.2 percent to 4.0 percent in Mozambique), but in both cases there will be growth in 2010.

“The economic performance of Cape Verde is even more significant, considering the significant costs of its small size, insularity and geographic configuration,” said the AfDB in its Economic Prospects for Africa 2009 report, issued Sunday in the Senegalese capital.

The archipelago, the AfDB said, was facing a number of challenges due to slower economic growth, high levels of debt, the currency’s indexation and a high balance of payment deficit,.

And one of the main risks is related to remittances from emigrants, which make up the majority of bank deposits of non-residents, accounting for 40 percent of the total.

Mozambique’s poor integration into world markets will protect the country’s economy which, even so, remains vulnerable to the world economic slowdown.

The floods in 2008 and social instability led to stagnation in reducing poverty and the “lack of credit and lowering of costs of raw materials are leading to drops in production and several public and private investment projects being cancelled, the AfDB said.

Following a rate of 10.3 percent in 2008 – above the 10 percent target set by the Maputo government – inflation is expected to fall to 7.2 percent in 2009 and 6.1 percent in 2010, despite public spending due to the general election this year which could be a “significant pressure on inflation and threaten,” those forecasts. (macauhub)