Standard Bank Moçambique lowers growth forecast for Mozambique’s GDP to 6.5 pct

30 January 2015

The growth rate of 7.5 percent expected for the Mozambican economy in 2015 may be revised downwards to 6.5 percent due to the impact of the floods that hit the country in recent weeks, according to an economic analysis from Standard Bank Moçambique.

The drop of one percentage point in the growth rate of gross domestic product (GDP) and impacts on the average annual inflation rate, which is expected to rise from 2.56 percent to 5.6 percent, are the main macroeconomic consequences of the floods affecting central and northern regions of Mozambique highlighted by the bank.

In its economic report for the month of January, Standard Bank is less optimistic than the International Monetary Fund, whose representative in Mozambique, Alex Segura, recently admitted a possible decline of half a percentage point in the initially forecast GDP growth rate, to 7 percent.

The analysis by the chief economist at Standard Bank Mozambique, Fáusio Mussá, focuses on the change in the inflation rate, which in 2014 was the “lowest in the history” of the country (average of 2.56 percent), and this year expects a negative scenario (5.6 percent), due to the combined effects of the floods and the depreciation of the metical against the dollar.

In the document sent to Macauhub, the financial institution notes the relative stability of the metical in the interbank foreign exchange market in 2014, adding that this was secured by the Bank of Mozambique, which, throughout the year, sold international currencies worth US$1.208 billion, compared to US$623 million in 2013.

The volatility of the metical in recent months may continue in the short term as a result of “a strong dollar on the international market and by seasonal factors linked to export and import cycles that are expected to continue to pressure net international reserves,” currently US$2.86 billion.

The sustainability of Mozambique’s public debt is also highlighted by Standard Bank, since “may be fast approaching the 40 percent limit” of the value of GDP, which “will most likely influence the way the government takes on new debt.”

In terms of the impact of exploration of natural resources, the bank said it was more important than the sector’s contribution to GDP (4 percent), as it is the area that attracts most foreign investment, creating macroeconomic stability whilst driving development of the country’s infrastructure network.

However, given the downward trend in coal and natural gas prices on international markets, the bank expects a slowdown in investment plans from companies in the sector, which could lead to some uncertainty, although no major impact on the Mozambican economy, whose growth rate will remain high. (macauhub/MZ)