EIU expects Mozambique’s trade deficit to decrease in 2015

26 March 2015

The fall in oil prices will have a significant impact on Mozambique’s balance of trade in 2015, according to the Economist Intelligence Unit (EIU), which anticipates a reduction in the deficit to 29.9 percent of gross domestic product (GDP).

In its March macroeconomic analysis of Mozambique, to which Macauhub had access, the EIU said imports of goods for the mining and energy sectors would keep the trade deficit high, although the country should benefit from the decline in fuel prices, with a decrease of 6.9 percentage points in the deficit compared to 2014, when the country recorded a deficit of 36.8 percent of GDP.

This situation will be favourable for state accounts, which still include a fuel subsidy, but only in 2015, as the EIU analysts expect the trade deficit increase again to 34.8 percent of GDP in 2016, driven by the “increase in fuel prices” and the “devaluation of the metical.”

By 2018, the fiscal deficit should be reduced from 10.4 percent of GDP in 2014 to 7 percent as a result of rapid economic growth and the increase in mining sector revenues, which should offset the decline in international aid to the state budget and an increase in public sector expenditure.

On the growth of the Mozambican economy in 2015, the EIU maintains a more optimistic view than organisations such as the International Monetary Fund (7 percent), considering that the impact of the floods that hit the country earlier this year should lead to expansion of GDP by 7.2 percent, compared to an initial forecast of 7.6 percent.

As for the period between 2016 and 2018, the EIU expects an average GDP growth of 7.4 percent, “supported by investments in the mining and energy sectors.”

In terms of annual average inflation, which in 2014 was 2.3 percent, the EIU expected it to remain at below 5 percent, totalling 3.9 percent. (macauhub/MZ)