Mozambique’s economy growing and business climate improving

9 August 2010

Macau, China, 9 Aug – The Mozambican economy continues to grow at a “surprising” rate whilst its business climate shows signs of improving, Portuguese bank BPI’s economists said.

“In a year of world recession (2009), Mozambique surprised us with economic growth of 6.4 percent, exceeding observers’ projections,” said the latest BPI analysis of the Mozambican economy, published at the end of July.

The “good performance” continued into the first quarter of 2010, with the government projecting growth of 6.2 percent.

“Reduced links to the international financial system, stability of international donations, the authorities’ activities to combat economic weakening and a good agricultural year are behind the favourable progress,” said the Portuguese bank’s economists.

For next year “expressive acceleration” of economic growth is expected, to around 7.5 percent according to the OECD and the IMF, thanks to mega coal projects going online, in Moatize and Benga.

Oil and gas prospecting work in the Rovuma basin (north) are also seeing positive developments, with the existence of natural gas reserves confirmed (around 42.5 billion cubic metres) and the possibility of crude oil reserves.

In the south, natural gas exploration at Pande and Temane will see a boost to capacity of around 36 percent, as of 2012.

Over the next few month a concession is due to be granted on another large project, which has been long awaited, the Mphanda Nkuwa dam.

“The increase in power production capacity is expected to have an important role in the country’s development,” said BPI.

“On the one hand, we expect regional economic growth to continue at a robust rate over the next few years, which will lead to an increase in energy requirements. On the other hand, domestic energy needs are not being met,” it said.

In the short and mid term the authorities are facing the challenge of maintaining a favourable macroeconomic context and also of making economic growth more inclusive, in order to reduce poverty.

“The boost to public investment, an improved business environment, the development of key economic sectors, improved integration with bordering countries and exploration of the country’s comparative advantages are the main vectors for action pointed to by most observers to meet this objective,” said BPI.

Alongside this, the business climate has been improving in the country, according to World Bank indicators.

Mozambique has risen 5 places on the Doing Business 2010 index, rising to 153rd place out of 183 countries.

“The progress achieved in the ease of opening up a business, specifically a smaller number of procedures and time needed, the elimination of minimum capital to open a company and more flexible rules for contracting workers are behind this improvement,” BPI wrote.

After a sharp drop in 2009, to 3.3 percent, the rate of inflation is once again rising, and this year is expected to reach two figures this year.

“The end of the fuel subsidy policy in March, and the return of oil prices to a high level explain this trend, which is also affected by changes in the exchange rate,” the analysis said. (macauhub)