Growth rate in Mozambique expected to increase from 2017

15 November 2016

The growth rate of the Mozambican economy is expected to increase from 2017, after ending 2016 with the lowest value in the last 15 years, of just 3.6%, according to the latest forecasts from the Economist Intelligence Unit (EIU) .

However, with an average rate of 4.4% in 2017/2018 and 5.3% in 2019/2021, growth of Mozambique’s economy will still be far from the average of 7.3% that was achieved in the period between 2005 and 2015.

The EIU said Mozambique’s economy has been undermined this year by a lack of foreign exchange, the exponential increase in inflation and reduced public spending, along with the perception among the leaders of the banking sector and private companies of high incidence of political risks.

The report obtained by Macauhub said that coal production will be one of the economic drivers, due to rising international prices and robust demand from India, one of the main importers of this product, along with the efforts of mining companies to reduce production costs.

Agriculture will contribute to economic recovery, with the weakening of the effects of El Niño, but this will offer limited growth due to low productivity achieved by small farmers.

The reduction in public spending, which is expected to fall by 16.4% in 2017, will limit the growth of the construction and services sectors, which historically has been supported by government contracts, but the EIU expects that some private investments will restore business confidence.

Public spending should grow again in 2019, at a rate of 4.8%, and at higher rates in the following years, of between 8.3% and 7.8%.

Inflation, which accelerated to 24.9% in September – the highest in more than a dozen years – is expected to remain high in the near future, fueled by the combined effect of the rapid devaluation of the currency, particularly against the South African rand from where most of the products purchased by Mozambique originate and a drop in agricultural production, particularly in the south of the country.

The issue of borrowing by public enterprises will make public debt, which in 2012 was 37.8% of Gross Domestic Product (GDP) and in 2015 was 75.8%, reach 127% of GDP at the end of this year. The EIU expects debt to begin to decline in 2017 and 2018, with values ​​of 122% and 111% of GDP, respectively. (macauhub)