The Economist revises Mozambique’s 2014 inflation rate down to 3.9 percent

14 August 2014

The Economist Intelligence Unit (EIU) has revised its estimate of Mozambique’s annual average inflation rate in 2014 down from 4.2 percent to 3.9 percent, increasing to 10 percent of GDP its forecast for the country’s budget deficit.

In its monthly macroeconomic analysis of Mozambique, referring to August, the EIU indicates that prices for food and fuel have fallen, whereby Mozambique should finish the year with an annual average inflation rate of 3.9 percent, versus the 5.6 percent forecast by the International Monetary Fund (IMF).

The analysts predict the country will grow by 7.3 percent this year, 7.8 percent in 2016 and 7.5 percent in 2018, with growth mainly driven by investments in the natural resources exploitation sector.

The IMF forecasts a possible Mozambican GDP growth rate of about 8.3 percent in 2014.

Regarding exports, the EIU estimates they will reach US$4.4 billion this year, rising to US$6.9 billion by 2018. The country’s current account deficit should fall from 39.2 percent this year to 32.9 percent at the end of the next five-year period.

In its report the organisation warns of the “record budget deficit amounting to 10 percent of GDP” that the country should post this year. This escalating figure is associated to spending on the October general elections and the guarantee of nearly US$300 million granted by the Mozambican state to Ematum, a tuna enterprise with mostly public capital.

Despite lower international aid for the Mozambican state budget, the budget deficit will tend to gradually fall until reaching 7.3 percent in 2018, compensated by tax revenue “resulting from strong GDP growth” and from the coal sector.

The EIU also anticipates that public debt will remain at 48 percent of GDP during the 2014-2018 period. (macauhb/MZ)