Cyclone Idai drives Mozambique’s economic growth to negative ground in 2019, EIU says

17 April 2019

The damage caused in Mozambique by cyclone Idai is expected to result in an economic contraction for the country of 2.0% this year, according to the latest forecasts from the Economist Intelligence Unit (EIU).

By 2020, the Mozambican economy is expected to return to growth, with a forecast of 3.0%, with the EIU forecasting an average growth rate of 5.4% in the period between 2020 and 2022, with a maximum of 7.5% in the last year of the period under analysis.

The document also said that the gas industry is expected to become one of the main drivers of the development of the country and recalls that this year the final investment decisions are due to be made for the projects of Area 1 and Area 4 blocks led by the groups Anadarko Petroleum and ExxonMobil/ENI.

However, in view of the fact that there is currently an over-supply in the world market for natural gas, large investments in land-based projects are not expected this year.

The expected economic growth rate for 2023, of 7.5%, is the result of the expected start this year of exploration of the gas deposits in the Coral Sul field in the Area 4 block.

Cyclone Idai has also driven price increases due to the destruction of agricultural units, with the inflation rate increasing to 8.1% this year and to 8.4% in 2020 before falling to rates of between 4.6% and 5.7% in the last three years of the period under analysis.

Gross fixed capital formation, or investment, will grow at a rate of 8.2% this year, after contracting 12.5% in 2018, and by 2020 to start growing by double-digits with 55.0% , which will be followed by rates of 45%, 35% and 30% in the years from 2021 to 2023, according to EIU forecasts.

The Mozambican currency, the Metical, is expected to continue to depreciate in 2019, also due to Cyclone Idai, which has exacerbated factors such as inflation, a slowdown in exports and a current account deficit, with EIU analysts expecting a decline in exports of 1.7% this year and 1.2% in 2020 and an increase in imports, with growth rates of 7.3% and 11.8% in 2019/2020. (Macauhub)