EIU predicts that Mozambique’s economy will grow 3.8pct in 2016

11 July 2016

Mozambique’s economy is expected to grow this year by just 3.8 percent, the lowest rate recorded in the last 15 years, wrote the Economist Intelligence Unit (EIU), in its latest report on the country.

On Monday, the Mozambican government is due to deliver an amended 2015 State Budget proposal to parliament. The revised budget’s macroeconomic scenario assumes a growth rate of 4.5 percent, against an initial forecast of 7.0 percent.

The EIU says that this cooling of the Mozambican economy reflects the decrease in public spending, reduced foreign direct investment due to deterioration of the business climate and the weather conditions that have had great impact on agricultural production.

The EIU analysts also said the increase in coal mining will be one of the factors for growth of the economy, which is related to the expected rise in ore prices on the international markets as well as to increased demand from India.

Traditional sectors are expected to provide a lower contribution than in the recent past. This is the case with agriculture, which should only resume normal production in 2017, after overcoming the effects of El Niño.

However, associated growth is expected to remain low due to the production structure being based on small family units and low yields, particularly for sugar, tea and cotton.

The natural gas industry has the potential to be a driver of long-term growth, but the extraction of the deposits discovered in northern Mozambique are only due to start being explored in the early 2020’s at best.

EIU forecasts EIU show that Mozambique’s economy should grow between 4.2 percent and 5.6 percent in 2017-2020, with private and public consumption registering a high contraction this year, such as public expenditure, which is expected to fall by 17.6 percent, before resuming growth.

Exports of goods and services, with a growth forecast of 3.7 percent this year, is expected to reach higher levels in the following years, reaching a rate of 8.1 percent in 2017 and 7.3 percent in 2018, before slowing to a growth rate of 4.6 percent in 2019 and 2020. (macauhub/MZ)