Cyclones Idai and Kenneth push Mozambique’s economy into contraction in 2019

23 May 2019

The economy of Mozambique is expected to contract in 2019, with the Economist Intelligence Unit (EIU) forecasting a negative rate of 2.2%, to grow again in 2020 and in the years to 2023, with the last year of the analysis seeing GDP growth of 7.5%.

The latest EIU report on Mozambique recalls the heavy damage to property, infrastructure, buildings, ports and farms with the passage of Cyclone Idai in the Sofala and Manica area in the centre of the country in March and Cyclone Kenneth in the north the following April.

As recovery of the damage caused by the passage of the two cyclones begins to produce results, Mozambique’s economy will return to growth at an annual average of 5.3% in the 2020/2023 period.

The EIU also noted the role that the oil groups involved in the Rovuma Area 1 and Area 4 blocks will have in Mozambique’s economic development when they begin natural gas extraction scheduled for 2023, which is awaiting a final investment decision.

The Area 1 block, a project led by US group Anadarko Petroleum, could be delayed, as the Occidental Petroleum group signed a contract to sell Anadarko’s assets in Africa to French group Total, a deal that was conditional on the purchase of Anadarko itself.

The EIU mentions, however, that both projects are import- and capital-intensive, and therefore, except for the tax revenue for the Mozambican state, their contribution to the growth and increased value of Mozambican companies should be limited.

The projected growth for 2023, at a rate of 7.5%, already incorporates the impact that the two natural gas exploration projects will have on the Mozambican economy, which is expected to grow at higher rates as large quantities of natural gas are exported, particularly to Asian markets.

The EIU report forecasts an increase in the rate of inflation due to rising food prices, taking into account the losses on farms that were affected by the two cyclones. (Macauhub)