Economist Intelligence Unit forecasts a contraction of 2.2% for Mozambique’s economy in 2019

18 July 2019

Mozambique’s Gross Domestic Product (GDP) is expected to contract by 2.2% this year, and return to modest growth of 2.7% in 2020, the Economist Intelligence Unit (EIU) projected in its latest country report.

According to the document, this evolution of the Mozambican economy is due to tropical storms Idai in March and Kenneth in April, which caused significant destruction on farms as well as in infrastructure, leading to a rise in prices, with inflation standing at 6.1% this year and 7.1% in 2020.

The EIU predicts that the Mozambican economy will reach higher rates of growth from 2021, with 5.6% in that year and the next, and 7.5% in 2023, the last year of the period analysed, when the beginning of the exploration of gas deposits in two blocks of the Rovuma basin is due to begin.

International support to Mozambique will reduce the budget deficit in 2019/2020, before growing again in 2021, reflecting the sharp drop in international aid.

The EIU report mentioned that some progress had been made with regard to commercial debts – an issue of euro bonds and two commercial loans with State guarantees totaling 2 billion euros – according to an announcement made in May by the Ministry of Economy and Finance.

On that occasion, the ministry said it was possible to reach an agreement with a group of creditors on the restructuring of Eurobonds in the amount of US$722 million after a previous restructuring of the original issue of US$850 million.

The EIU analysts said these issues will not prevent oil and gas company Empresa Nacional de Hidrocarbonetos (ENH) from raising about US$2.3 billion on the international market. This amount is ENH’s share of the investment needed to start gas extraction in Area 1, operated by US group Anadarko Petroleum.

ENH announced in the meantime that it had decided to postpone its request for funding from the market until the end of the year, considering that current conditions are not the best, Chairman Omar Mithá told Bloomberg. (Macauhub)