Mozambique’s economic growth is expected to increase from 2018

13 January 2017

Mozambique will return to a period of increased economic growth between 2018 and 2021, during which the economy is expected to grow at an average rate of 5.1%, according to the latest forecasts from the Economist Intelligence Unit (EIU).

However, the publication points out that, even reaching an average rate of 5.1%, the economy continues to grow at lower values ​​than the average of 7.3% that was recorded in the period between 2005 and 2015.

A rigid budget execution is expected to limit growth of the construction and services sectors, “which historically have based their growth on public contracts,” with the EIU expecting that from 2018 there will be some private investment in these sectors.

The gradual expansion of cash crops should be the basis of growth in agricultural production, although it will remain limited due to drops in productivity among small farmers.

The EIU notes that, over time, the exploration of natural gas by Italian group ENI and US group Anadarko Petroleum, is expected to be the great driver of the country’s development, with the construction of facilities for the liquefaction of gas to be extracted in two blocks in the Rovuma basin.

However, the EIU said, “it is not expected that exploration of gas reserves can begin in the period (2016/2021) due to the complexity of the projects in which those two groups are operators and the fact that there is a contraction in international lending.”

Prices, which the EIU projects will reach an annual growth rate of 23.8% this year, should start to decline in 2018, with a rate of 14.3%, after which they are expected to return to a single digit of between 8.8% in 2019 and 5.0% in 2021.

The budget deficit this year is expected to fall this year to 6.7%, after an estimate of -9.7% in 2016, before contracting to between -5.4% in 2018 and -3.0% in 2021.

Gross fixed capital formation, or investment, is expected to contract 14.8% this year, after falling by an expected 11.6% in 2016, after which growth will resume with a marginal value of 0.2% in 2018, 5.2% in 2019, 11.6% in 2020 and 10.2% in 2021.

The EIU also mentioned monetary policy, saying that the Bank of Mozambique will seek to stabilise the national currency and prices but said that, taking into account the dollar’s rise in the international markets, it appears that the metical will continue to devalue in 2017. (macauhub)